ikoreaii

FQ global fund is a US fund with investments in European equity and was valued at 102 million Euros as of January 1, 2003. During the first quarter of 2003, dividend income paid out by the fund was 2.3 million Euros. The fund was valued at 105.10 million Euros as of March 31, 2003. During the quarter, the Euro appreciated by 2% against the US Dollar. What is the capital gains yield on the fund in local currency?

A) 3.04%.

B) 5.10%.

C) 3.10%.

---

Capital gains yield in local currency = (105.10/102) – 1 = 3.04%.

ikoreaii

FQ global fund is a US fund with investments in European equity and was valued at 102 million as of January 1, 2003. During the first quarter of 2003, dividend income paid out by the fund was 2.3 million. The fund was valued at 105.10 million as of March 31, 2003. During the quarter, the Euro appreciated by 2% against the US Dollar. What is the total return on the fund in local and home currencies?

A) 5.29%; 7.40%.

B) 5.10%; 7.10%.

C) 3.10%; 5.10%.

---

Total return in local currency = Capital gains yield +Dividend yield

= [(105.10/102) – 1] + (2.3/102)

3.04 + 2.25 = 5.29%

Total return in home currency = Capital gains yield + Dividend yield + Currency effect

Currency effect = ej × (1 + CGj + Dj) = 0.02 × (1 + 0.0304 + 0.0225) = 0.0211 or 2.11%

Total return in home currency = 5.29% + 2.11% = 7.40%