Assume that you are a British investor who is considering investments in the German (Stocks A and B) and Swiss (Stocks C and D) stock markets. The world market risk premium is 4.5%. The currency risk premium on the Swiss franc is 0.5%, and the currency risk premium on the euro is 1%. The interest rate on one-year risk-free bonds is 4% in the United Kingdom. In addition, you are provided with the following information:
$$\begin{array} { c c c c c }
\text { Stack } & \mathbf { A } & \mathbf { B } & \mathbf { C } & \mathbf { D } \
\hline \text { Country } & \text { Germany } & \text { Germany } & \text { Switzerland } & \text { Switzerland } \
\beta _ { w } & 1 & 0 .90 & 1 & 1.5 \
Y_{ €}& 1 & 0.80 & - 0.25 & - 1.0 \
Y_{SF} & -0 .25 & 0.75 & 1.0 & - 0.5
\end{array}$$ Calculate the expected return for each of the stocks. The British pound is the base currency.

Question

Assume that you are a British investor who is considering investments in the German (Stocks A and B) and Swiss (Stocks C and D) stock markets. The world market risk premium is 4.5%. The currency risk premium on the Swiss franc is 0.5%, and the currency risk premium on the euro is 1%. The interest rate on one-year risk-free bonds is 4% in the United Kingdom. In addition, you are provided with the following information:
 $$\begin{array} { c c c c c } 
\text { Stack } & \mathbf { A } & \mathbf { B } & \mathbf { C } & \mathbf { D } \
\hline \text { Country } & \text { Germany } & \text { Germany } & \text { Switzerland } & \text { Switzerland } \
\beta _ { w } & 1 & 0 .90 & 1 & 1.5 \
Y_{ €}& 1 & 0.80 & - 0.25 & - 1.0 \
Y_{SF} & -0 .25 & 0.75 & 1.0 & - 0.5
\end{array}$$ Calculate the expected return for each of the stocks. The British pound is the base currency.

Quizplus · Accepted Answer

The Answer of Assume that you are a British investor who is considering investments in the German (Stocks A and B) and Swiss (Stocks C and D) stock markets. The world market risk premium is 4.5%. The currency risk premium on the Swiss franc is 0.5%, and the currency risk premium on the euro is 1%. The interest rate on one-year risk-free bonds is 4% in the United Kingdom. In addition, you are provided with the following information:
 $$\begin{array} { c c c c c } 
\text { Stack } & \mathbf { A } & \mathbf { B } & \mathbf { C } & \mathbf { D } \
\hline \text { Country } & \text { Germany } & \text { Germany } & \text { Switzerland } & \text { Switzerland } \
\beta _ { w } & 1 & 0 .90 & 1 & 1.5 \
Y_{ €}& 1 & 0.80 & - 0.25 & - 1.0 \
Y_{SF} & -0 .25 & 0.75 & 1.0 & - 0.5
\end{array}$$ Calculate the expected return for each of the stocks. The British pound is the base currency.

Assume That You Are a British Investor Who Is Considering