00:01
So here we have two different transactions that are happening at the same time, and we need to compute a joint rate of return.
00:06
So the first transaction is the stock purchase, right? we start off with 100k usd, and the exchange rate is equal to 50 pounds, right, per dollar.
00:22
So this goes to 50 ,000 pounds, right? now, we know that the price of the stock, the price of the stock is easy.
00:30
Equal to 50 pounds.
00:32
So this gives us 1 ,000 shares.
00:37
Great.
00:38
Now we hold those shares.
00:41
Now the price changes over the year so that the price goes to 45 ,000 shares, which means that we have 45 ,000 pounds when shares are sold.
00:59
Right.
01:00
And now the new exchange rate is equal.
01:03
Will to 60 pence per dollar, which implies that we need to convert this.
01:14
So we go 45 ,000 pounds times $1 over 60 pound cents, which gets that to cancel.
01:28
So we get a measurement just in terms of dollars.
01:34
So $45 ,000 over 0 .6 gives us $75 ,000.
01:43
So this is obviously a losing transaction.
01:47
You put your money into british equities, the stock fell in value, and the pound got weaker, right? so you were putting your money into pounds, the stock fell, the pound fell, and then so when you convert back to american dollars, you've obviously lost a bunch of...