Question

Spencer Grant and Vaniteux (A). Spencer Grant is a New York-based investor. He has been closely following his investment in 500 shares of Vaniteux, a French firm that went public in February 2010. When he purchased his 500 shares at €17.83 per share, the euro was trading at $1.3699/€. Currently, the share is trading a €29.02 per share, and the dollar has fallen to $1.4176/€.

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

The shareholder return is ---- %. (Round to two decimal places.)

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

The percentage change in the value of the euro versus the dollar is ---- %. (Round to two decimal places.)

c. What would be the total return Spencer would earn on his shares if he sold them at these rates?

C. a. If he sold his shares today, it would yield the following amount in euros € ----. (Round to two decimal places.)

b. The sales proceeds in U.S. dollars is $ ---- . (Round to the nearest cent.)

c. The original investment (cost) of 500 shares in Vaniteux in euros is € ----.(Round to two decimal places.)

d. The original investment (cost) of shares in U.S. dollars, calculated at the original spot rate is $---- (Round to the nearest cent.)

Answer 1

Problem 2.3 Vaniteux's Returns (A)
Spencer Grant is a New York-based investor. He has been closely following his investment in 100 shares of Vaniteux, a French firm that went public in February of 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 $1.4170/€. a. If Spencer sells his shares today, what percentage change in the share price would he receive? b. What is the percentage change in the value of euro versus the dollar over this same period? c. What would be the total return Spencer would earn on his shares if he sold them at these rates?
		Share		Exchange Rate
Assumptions		Price		(US$/€)
Prices when Spencer purchased his shares		€ 17.83		1.3699
Prices Spencer sees in the market today		€ 29.02		1.4176
a. If Spencer sold his shares today, what is the percentage change in the share price he would receive?
Return = (P2 - P1) / (P1)		62.76%
b. What has been the percentage change in the value of euro versus the dollar over this same period?
Percentage change (US$/€) = ( S2 - S1 ) / (S1)		3.48%
c. What would be the total return Spencer would earn on his shares if he sold them at these rates?
If he sold his shares today, it would yield the following amount in euros:						€ 14,510.00
These euros would in turn be worth the following in US dollars:						$20,569.38
The amount he invested in the beginning can be determined by tracing backwards the cost of 500 shares of Vaniteux at the original price, and then finding what that amount would have been in U.S. dollars.
Original investment (cost) of 500 shares in Vaniteux in euros:						€ 8,915.00
Original investment (cost) of shares in U.S. dollars, calculated at original spot rate:						$12,212.66
The rate of return on Spencer's investment, proceeds divided by initial investment:						68.43%
(Remember to subtract 1, the value of the initial investment, when calculating return.)