Here is perhaps an easier way to do it: Rd= Domestic return Rlc = Local currency return = Capital Gain + Yield Income = .08 +.01 = .09 S = currency spot appreciation = -0.02 Rd = Rlc + S + Rlc * S Rd = .09 + -0.02 + (.09)(-0.02) Rd = .0682
LobsterBoy Wrote: ------------------------------------------------------- > Here is perhaps an easier way to do it: > Rd= Domestic return > Rlc = Local currency return = Capital Gain + Yield > Income = .08 +.01 = .09 > S = currency spot appreciation = -0.02 > > Rd = Rlc + S + Rlc * S > Rd = .09 + -0.02 + (.09)(-0.02) > Rd = .0682 Obviously this is unhedged return. We got a bit off track here though.
Paraguay Wrote: ------------------------------------------------------- > LobsterBoy Wrote: > -------------------------------------------------- > ----- > > Here is perhaps an easier way to do it: > > Rd= Domestic return > > Rlc = Local currency return = Capital Gain + > Yield > > Income = .08 +.01 = .09 > > S = currency spot appreciation = -0.02 > > > > Rd = Rlc + S + Rlc * S > > Rd = .09 + -0.02 + (.09)(-0.02) > > Rd = .0682 > > Obviously this is unhedged return. We got a bit > off track here though. I don’t see whats wrong with LobsterBoy’s calculation, both formulas work out to be the same and can be derived from one another, so I don’t understand what you mean by saying it is the unhedged return?