ICAPM question

C: korean risk free + (global beta x global mrp) + (FCRP x (local sensitivity +1)) = 14.2
 
Suppose that a U.K. investor holds a U.S. security. The U.S. security has a negative correlation with changes in the value of the U.S. dollar in local currency terms. What does the negative correlation mean for the U.K. investor? The:
A) security exaggerates the impact of currency movements.
B) local currency γ is greater than one.
C) security provides a natural hedge against currency movements.
D) domestic currency γ is greater than one.
 
LanceTX Wrote:
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> Suppose that a U.K. investor holds a U.S.
> security. The U.S. security has a negative
> correlation with changes in the value of the U.S.
> dollar in local currency terms. What does the
> negative correlation mean for the U.K. investor?
> The:
> A) security exaggerates the impact of currency
> movements.
> B) local currency γ is greater than one.
> C) security provides a natural hedge against
> currency movements.
> D) domestic currency γ is greater than one.
I am C for this question..
 
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