Type the Excel formula that converts a US-dollar index return in B1 into Canadian-dollar terms, with the US dollar’s change in CAD terms in B2.
Type the Excel formula that converts a US-dollar index return in B1 into Canadian-dollar terms, with the US dollar’s change in CAD terms in B2.
Answer
=(1+B1)*(1+B2)-1
B1 = 0.06, B2 = 1.33/1.36 − 1 = −0.022059 → 0.036618. The two returns multiply as growth factors; they are not added.
Bank of Canada exchange-rate explainer (on disk) — quote direction; OpenStax Principles of Finance §15.4 — reward-to-risk, reference only; Lessons 8.8 and 13.4 of this course; original figures