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Suppose a U.S. investor wishes to invest in a British firm currently selling for £120 per share. The investor has $36,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £105, £110 and £115 after 1 year. Also, consider three possible exchange rates at $1.6/£, $2/£ and $2.4/£ after 1 year. Calculate the standard deviation of both the pound- and dollar-denominated rates of return if each of the nine outcomes (three possible prices per share in pounds times three possible exchange rates) is equally likely. (Round your answers to 2 decimal places. Do not round intermediate calculations. Omit the "%" sign in your response.)

Standard deviation of pound-denominated return ______% ?

Standard deviation of dollar-denominated return ______% ?

Financial Management, Finance

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