tianxin

From the common sense point of view I understand.

We own a foreign stock. The foreign currency goes down 10%. But with this stock, the stock goes up 6% when the currency goes down 10%.

So we have a net return of -4%

but the question asks for the sensitivity

and I can't figure it out. The textbook explanation is difficult p. 501-502

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Let's get back to this formula:

This one uses the formula R = Rfc +s whisch is just

Return domestic = return (local) foreign + exchange rate movement

return (local) foreign = ????????????????? (how did you figure this out?) Is it 6%/10%, and negative because they are an exporting company?

C'mon, if you have the keys, don't make me beg, If I understood it I would help you