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1. A U.S. institutional investor would like to purchase 10,000 shares of Lafarge, a French firm that trades on the Paris Bourse, the London stock exchange, and the NYSE as an ADR. At the NYSE, one depositary receipt is equivalent to one-fourth of a Lafarge share. The U.S. investor asks its brokers to quote net prices, without any commissions in the three trading venues. There is no stamp tax in London on foreign shares listed there. The stock quotes are as follows:

New York $24.07 - 24.37
London £66.31 - 67.17
Paris ?99.40 - 100.30

The exchange rate quotes are:

£:$ = 1.4575 - 1.4580
?:$ = 0.9691 - 0.9695

Compare the dollar costs of purchasing 10,000 shares, or its equivalent, in New York, London, and Paris.

2. A U.S. institutional investor would like to buy 10,000 shares of British Polythene Industries, a U.K. firm that trades on the London stock exchange, but not on the NYSE or NASDAQ. A U.K.-based broker of the investor quote the price as £3.45 - 3.60, with a commission of 0.10 percent of the transaction value. There is a 0.50 percent U.K. securities transaction tax on the purchase. The exchange rate quoted by a bank is £:$ = 1.5005 - 1.5010. Calculate the total cost in dollars.

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Solution Summary

The foreign shares and stock quotes are determined.

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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