A Canadian Plans to Buy 100 Shares of This American

question 13

Multiple Choice

$\begin{array}{|l|r|r|rr} \hline& \text { Expected Return } & \begin{array}{r}\text { Standard Deviation of } \\\text { Return }\end{array} &{\text { Correlation }} \\& & & \text { Coefficients } \\& & & \text { X }& \text {Y} \\\hline \text { Canadian Stock X } & 6 \% & 9 \% & 1.00 & \\\hline \text { American Stock Y } & 4 \% & 8 \% & 0.80 & 1.00\\ \hline\end{array}$

A Canadian plans to buy 100 shares of this American stock for US $20 per share. The current spot rate is C$1.2977 = US $1. Suppose that this investor can sell the stock for US $30 a share a year later. The spot rate at the time of the sale is C$1.3029 = US $1.
-What will the annual percentage return be on foreign exchange measured with Canadian dollars for this investor?

• A) -0.50%
• B) -0.20%
• C) -0.10%
• D) -0.40%
• E) -0.30%

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Definitions:

Third World

A term originally used to describe countries not aligned with either the NATO or the Communist Bloc, often referencing developing nations with lower economic indicators.

Developing Nations

Countries with a less developed industrial base and a low Human Development Index (HDI) relative to other countries, often characterized by a focus on agricultural production.

Cold War

The state of geopolitical tension and conflict primarily between the United States and the Soviet Union, and their respective allies, from the end of World War II until the early 1990s.

Working Women

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