Problem:
You are a US who is considering investment in French (stocks A and B) and Swiss (stocks C and D) stock markets. The World market risk premium is 6%. The currency risk premium on the Swiss Franc (CHF) is 1.25% and the currency risk premium on the Euro (EUR) is 2%. The risk-free rate in the US is 3.75%. Given the information below the expected return on Stock A with the US dollar as the base currency is _________%.
|
Stock
|
A
|
B
|
C
|
D
|
|
Country
|
France
|
France
|
Switzerland
|
Switzerland
|
|
βw
|
1
|
0.9
|
1
|
1.5
|
|
ΥEUR
|
1
|
0.8
|
-0.25
|
-1.0
|
|
YCHF
|
-0.25
|
0.75
|
1.0
|
-0.5
|
Summary of question:
Basically this question belongs to Finance as well as it explains about the expected return for investing in a stock in France by US dollars.