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1 The sale of foreign bonds by a foreign corporation leads to: O an increase in the demand for the foreign currency both an increase in the demand for the foreign currency and a decrease in the supply of the domestic currency O an increase in the supply of the foreign currency O a decrease in the supply of the domestic currency 2 Calculate the geometric return of an investment with five year returns of 15%, 10%, 5%, (5%) and (10%)
1 The sale of foreign bonds by a foreign corporation leads to: O an increase in the demand for the foreign currency both an increase in the demand for the foreign currency and a decrease in the supply of the domestic currency O an increase in the supply of the foreign currency O a decrease in the supply of the domestic currency
2
Calculate the geometric return of an investment with five year returns of 15%, 10%, 5%, (5%) and (10%). A. 13.57% B. 11.38% C. 9.41% D. 5.23% E. 3.00%
181. Calculate the arithmetic return of an investment with five year returns of 10%, 6%, 4%, 2% and (10%). A. 7.32% B. 8.32% C. 9.32% D. 10.32% E. 11.32%
Expert Solution
1 an increase in demand for foreign currency as the investors across the world may deand such foreign currency to invest in those bonds and thus leading to increase in demand for foreign currency and increase in supply of domestic currency.
2
A. 13.57%
Geometric return = Total returns over the time period-1
Geometric return = ((1+0.15)*(1+0.10)*(1+0.05)*(1-0.05)*(1-0.10))-1
Geometric return = 13.57%
181. Arithmetic return = (Total absolute return/Initial investment)-1
Arithmetic return = (0.1+0.06+0.04+0.02-0.10)/5
Arithmetic return = 2.4%
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