Calculate the Euro-Based Return an Italian Investor Would Have Realized

question 8

Essay

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.One year after investment,the stock pays a £1 dividend,and sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound,although he sold £10,000 forward at the forward rate of €1.28 per pound.
Spot exchange rates at the start and end of the year are shown in the table.
$$\begin{array} { l c c c } & \text { Spot Rate } \mathrm { T } = 0 & \text { Spot Rate } \mathrm { T } = 1 & \text { Forward Rate } \\\text { Euro } & \$ 1.6 \mathrm { O } & \$ 1.60 & \$ 1.625 \\\text { Pound } & \$ 2.00 & \$ 2.08 & \$ 2.08\end{array}$$

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