Return in Domestic Currency (Schweser Mock #2 Afternoon Question 41)

CFA Level III Portfolio Management
#1

Is there only special circumstances to using:

Rdc= (1+Rfc)(1+Rfx)

vs.

Specifically breaking out the return:

Unhedged return (Convert into domestic currency at 2 beginning and end to calculate a return using spots at t=0 and t=T)

  • Hedged Return (Return % on forward using Forward at t=0 and t=T)

Schweser Mock #2 Afternoon Question 41 uses the second instance. If you use the first instance you get a completely different answer.