CFAI Mock Afternoon QST 58

What is the correct equation for unhedged one dollar return on a foreign security?

In schweser, it is just the sum of the change in currency and the change in value of asset.

But on CFAI we have to add the product of those two values to the sum of the above equation?? Can someone help?

I think the difference is whether you use the approximation or the actual formula. If you start with 1 unit of the domestic currency, convert it to FC, invest it, and translate it you will get the answer in the solution. If you use the approximation you’re only off by a little. Still pretty confusing though…

yea, i kinda freaked out a little bit because this is supposed to be one of the core formulas and schweser didnt even mention this. Thanks!