Transcribed Image Text
Suppose a U.S. investor wishes to invest in a British firmcurrently selling for £40 per share. The investor has $12,000 toinvest, and the current exchange rate is $2/£. Consider threepossible prices per share at £39, £44, and £49 after 1 year. Also,consider three possible exchange rates at $1.6/£, $2/£, and $2.4/£after 1 year. Calculate the standard deviation of both the pound-and dollar-denominated rates of return if each of the nine outcomes(three possible prices per share in pounds times three possibleexchange rates) is equally likely. (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.)