Stock Investments: Adjusting Returns for Exchange Rates
Not what you're looking for?
A French investor buys $100 shares of Goodyear Corp. for $3,000($30 per share). Over the course of a year, the stock goes up 6 points.
a. If there is a 10 percent gain in the value of the dollar versus the euro, what will be the total percentage return to the French investor? First determine the new dollar value of the investment and multiply this figure by 1.10. Divide this answer by $3,000 to get a percentage value, and then subtract 100 percent to get the percentage return.
b. Now assume the stock increases by 8 points, but that the dollar decreases by 14 percent versus the euro. What will be the total percentage return to the French Investor? Use .86 in the place of 1.10 in this case.
Purchase this Solution
Solution Summary
This solution is comprised of a step by step response which outlines how to calculate the rate of return after accounting for exchange rates. All calculations are included and the final answers are given in percentages.
Solution Preview
a. The stock goes up by $6 and the price becomes $36. The total dollar value is ...
Purchase this Solution
Free BrainMass Quizzes
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.