Respuesta :
No, the volatility of the dollar return to an investment in the Japanese equity market the sum of the volatility of the Japanese equity market return in yen plus the volatility of dollar/yen exchange rate changes because, dollar/yen exchange rate, the volatility of this sum is not the sum of the volatilities. (A + 2AB + B) = [(A + B)] = (A + B) in the Japanese equity market will be less than the sum of the two volatilities.
No, the volatility of the dollar return of a Japanese stock market investment is the sum of the volatility of the Japanese stock market return in yen and the volatility of the dollar/yen exchange rate. This total is not the total volatility. (A + 2AB + B) = [(A + B)] = (A + B) is less than the sum of the two volatilities on the Japanese stock market.
An exchange rate is the rate at which one currency is exchanged for another and affects trade and monetary transactions between countries. Exchange rates are affected by both the value of the domestic currency and the value of the foreign currency. In July 2022, the USD to EUR exchange rate was 1.02. This means that it costs $1.02 to buy 1 euro. The exchange rate between two currencies is usually determined by each country's economic activity, market interest rates, gross domestic product and unemployment rate.
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