Explain exchange rate affect the return from foreign market, Financial Management

Assignment Help:

Explain how exchange rate fluctuations influence the return from a foreign market measured in dollar terms. Discuss the empirical proof on the effect of exchange rate doubt on the risk of foreign investment.

Answer: Exchange rate fluctuations mainly give to the risk of foreign investment through its own volatility also its covariance with the local market returns. The covariance is apt to be positive in most of the cases, involving that exchange rate changes tend to add to exchange risk, in place of offset it. Exchange risk is found to be much more important in bond investments as compared to in stock investments.


Related Discussions:- Explain exchange rate affect the return from foreign market

find the weighted average cost of capital, Given the following information...

Given the following information, find the Weighted Average Cost of Capital (WACC).  Assume the corporate tax rate is 35%, and give an answer based on market values of debt and equi

Interest rate risk for floating-rate securities, In a fixed-rate coup...

In a fixed-rate coupon bond, the change in the price can be attributed to the change in the market interest rates. This change is due to the difference in the pre

Calculation of weighted average cost of capital, Calculation of Weighted Av...

Calculation of Weighted Average Cost of Capital The calculation of weighted cost of capital involves the following steps: (i) Calculate the cost of each source of funds.

Valuing zero-coupon bond, As we know, zero-coupon bonds are issued wi...

As we know, zero-coupon bonds are issued without any periodic coupon payments. The investor gets the interest and the principal on a maturity date. The interest i

Simple average of the outcomes - time constraint, 1. Your welfare depends o...

1. Your welfare depends on how much time you travel T and how much time you play P and is the product of the two, i.e.,  W = T * P (a) The total amount of time you have is 10 ho

Cost of Capital, The Nu-Nu Brothers Inc. (NNBI) has the following capital s...

The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net income

Explain present value of a series of cash flows, Q. Explain Present Value o...

Q. Explain Present Value of a Series of Cash Flows? Present Value of a Series of Cash Flows: - In a business circumstances it is very natural that returns received by a firm ar

What is capital recovery, Q. What is Capital recovery? sometimes one ma...

Q. What is Capital recovery? sometimes one may be interested to find out the annual amount paid in the order to redeem a loan of a specific amount over a specific period togeth

Duration, Now that we have an understanding about price volatility ...

Now that we have an understanding about price volatility characteristics of a bond, let us turn to the duration/convexity approach, which is an alternative

Evaluate alternative hedging strategies, Peak Inc. needs to order Canadian ...

Peak Inc. needs to order Canadian raw materials to use in its production process. The Canadian exporter typically invoices Peak in Canadian dollars. Assume that the current exchang

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd