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Determining Annualized Return

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The treasurer of a U.S. firm noted that although short run deposits in Swiss bank accounts had earned the firm only a 3% annualized return when measured in Swiss francs, in dollars the firm had realized a 12% rate of return. Explain as precisely as possible how this was possible.

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This solution provides steps to determine an annualized return.

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If the realized return is higher in dollar terms that means Swiss Franc has strengthened against US$. So the additional return of 9% is resulting from the depreciation of ...

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