Question
In: Finance
Erin McQueen purchased 80 shares of BMW, a German stock traded on the Frankfurt Exchange, for...
Erin McQueen purchased 80 shares of BMW, a German stock traded
on the Frankfurt Exchange, for euro 65.4 (euros) per share
exactly one year ago, when the exchange rate was 0.68 euro /US$.
Today the stock is trading at euro 71.3 per share, and the
exchange rate is 0.75 euro /US$. (Enter all losses as negative
numbers.)
c. For how much in US$ can Erin sell her BMW shares today?
d. Ignoring brokerage fees and taxes, how much profit (or loss)
in US$ will Erin realize on her BMW stock if she sells it
today?
Solutions
Expert Solution
c. Current price = 71.3 Euro.
Number of shares = 80
Price of Euro / dollar = 0.75
Hence Erin can sell BMW share at 71.3 * 80 * 0.75
= $4,278
d. Purchase price of Erin one year ago in US $
65.4 Euro * 80 shares = 5,232 Euros
Exchange rate = 0.68 / US$
= 5,232 * 0.68
= $3,558 (rounded)
If Erin sells the shares to day she will realize $4,278 as calculated above,
Therefore, profit will be Selling price - Purchase price = $4,278 - $3,558
Profit = $720
jeff jeffy answered 10 months agoRelated Solutions
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