Question

Spencer Grant and Vaniteux (A). Spencer Grant is a New Yorkbased investor. He has been closely following his investment in 100 shares of Vaniteux, a French firm that went public in February 2010. When he purchased his 100 shares at €17.25 per share, the euro was trading at $1.360/€. Currently, the share is trading at €28.33 per share, and the dollar has fallen to $1.4170/€.

1. If Spencer sells his shares today, what percentage change in the share price would he receive?

2. What is the percentage change in the value of the euro versus the dollar over this same period?

3. What would be the total return Spencer will earn on his shares if he sells them at these rates?

Answer 1

Solution

a. Determine the percentage change in share price, subtract the original price of the stock from the new price of the stock and divide by the original price as follows:

Therefore, he received 64% due to change in price.

b. Determine the percent change in value of euro versus dollar, subtract the original exchange rate from the new exchange rate and divide by the original exchange rate as follows:

Therefore, the % change in Euro versus Dollar is 4.2%.

c. Determine the total return, first use the exchange rate at the time of the purchase and exchange rate at the time selling of stock to change to stock prices into U.S. dollars, as follows:

Purchase price of stock in dollar:

Selling price of stock in dollar:

Then subtract the original price of the stock from the new price of the stock and divide by the original price:

Therefore, the total return is 71%.