Problem: An American investor buys 100 shares of London Enterprises at a price of £50 when the exchange rate is $1.60/£. A year later the shares are selling at £52. No dividends have been paid.
Q1. What is the rate of return to an American investor if the exchange rate is still $1.60/£?
Q2. What if the exchange rate is $1.70/£?
Q3. What if the exchange rate is $1.50/£?