Question

uppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.420 Swiss francs per dollar. Today, at maturity, the exchange rate is 1.324 Swiss francs per dollar. What is the annualized rate of return to the Swiss investor? a. 12.00% b. 6.00% c. 8.25% d. −4.13%

Answer 1

- 7.92%

Step-by-step explanation:

The computation of the annualized rate of return is shown below:

But before that we have to compute the following calculations

Invested amount at that time

= $9,708.74 × $1.420

= 13786.41

Maturity amount at that time

= $10,000 × 1.324

= $13,240

Since these values are 6 months ago, so the rate of return is

= (13,240 - 13,786.41) ÷ 13,786.41 × 100

= - 3.96 %

So, Annualized rate of return is

= - 3.96 × 2

= - 7.92%

This is the answer but the same is not provided in the given options