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    A Peruvian investor buys 100 shares of a U.S. stock for $400

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    A Peruvian investor buys 100 shares of a U.S. stock for $4000 ($40 per share). Over the course of a year, the stock goes up by $6 per share.

    a. If there is a 10 percent gain in the value of the dollar versus the Peruvian sol, what will be the total percentage return o the Peruvian investor? First determine the new dollar value of the investment and multiply this figure by 1.10. Divide this answer by $4,000 and get a percentage value, and then subtract 100 percent to get the percentage return.

    b. Now assume that the stock increases by $7, but that the dollar decreases by 10 percent versus the Peruvian sol. What will be the total percentage return to the Peruvian investor? Use .90 in place of 1.10 in this case.

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    Solution Preview

    a. The new dollar value of the investment = $46*100 = $4,600
    Because there is 10% gain in value of dollar vs. ...

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