Global Performance Evaluation Reading 42 EOC #1

I’ve been struggling with this for an hour. and I don’t know if I’m just burned out today or what, but I just can’t seem to figure this thing out.

Can anyone please help me to understand why on part B of this section the solution is using the skr6/$ exchange rate to translate the $30,000 capital gain off of U.S. Stocks?

The part that throws me off is that this is the Jan 1 exchange rate why wouldn’t you use the year end exchange rate to translate a capital gain that accrued over the course of the year?

Thanks in advance,


This question is beyond wierd. You are valuing the us stocks in SKr at the beginning and end of the investment period. That gives you the rate of return in SKr . How else would you do it? Are you thinking of some complicated mark to market calculation ? Even if you did it that way your linked return would be the same. I am trying to read your mind here

keep in mind, the question specifically says returns and investments are done in swedis kroner. therefore US is a foreign curency. i did a double take when i looked at the problem, becuz u dont often see things done as a swedish-home currency investor.

therefore the gain comes from 2 places, capital gain on the asset (on a domestic, USD basis) and currency effect (USD appreciate or depcreciation vs. the local swedish kroner).

They are using Jan1 SKr exchange rate to convert the US stock return to see had the exchange rate stayed at the same level, what would have been the capital gain…

Thank you rahuls, makes perfect sense now.


When US$ becomes a foreign currency, the question turns ugly!