The domestic currency value of the return on a foreign investment when the foreign currency proceeds are sold in the forward market,is defined to be the
A)covered return.
B)uncovered return.
C)forward return.
D)Both B and C.

Question

Quizplus · Accepted Answer

The covered return refers to the domestic currency value of the return on a foreign investment when the foreign currency proceeds are sold in the forward market. This is because the investor has covered their foreign exchange risk by entering into a forward contract, which locks in the exchange rate for the future sale of proceeds. The uncovered return (B) refers to the domestic currency return on a foreign investment without hedging the foreign exchange risk, while the forward return (C) is not a commonly used term in finance. Therefore, A is the best choice for this question.

The Domestic Currency Value of the Return on a Foreign