Assume that you have invested $100,000 in British equities

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Assume that you have invested $100,000 in British equities. When purchased, the stock's price and the exchange rate were £40 and £0.40/$1.00 respectively. At selling time, one year after purchase, they were £60 and £0.60/$1.00. If the investor had sold £40,000 forward at the forward exchange rate of £0.45/$1.00. The dollar rate of return would be:

 

7.58%

13.90%

22.22%

17.09%