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​Vaniteux's Returns​ (B). Spencer Grant is a New​ York-based investor. He has been closely following his...

​Vaniteux's Returns​ (B). Spencer Grant is a New​ York-based investor. He has been closely following his investment in400shares of​ Vaniteux, a French firm that went public in February 2010. When he purchased his 400 shares at€18.07 per​ share, the euro was trading at$1.3602/€.​Currently, the share is trading at€27.68per​ share, and the dollar has fallen to $1.4065/€. Spencer considers selling his shares at this time but chooses not to sell them after all. He​ waits, expecting the share price to rise further after the announcement of quarterly earnings. His expectations are​ correct, and the share price rises to €31.17 per share after the announcement. The current spot exchange rate is $1.3231/€.

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 the 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?

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

The shareholder return is

72.5072.50​%.

​(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

nothing​%.

​(Round to two decimal​ places.)

Solutions

Expert Solution

share price exchange rate(US$/€)
Prices when Spencer purchased his shares €18.07 $1.3602

Prices Spencer sees in the market today

 €27.68 $1.4065
price after announcement of quarterly earnings €31.17 $1.3231

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

   Return = (P2 - P1) / (P1).  

31.17-18.07/18.07*100= 72.50%

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

   Percentage change (US$/€) = ( S2 - S1 ) / (S1)

1.3231-1.3602/1.3602*100= -2.73%

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 400*31.17= euro 12468

   These euros would in turn be worth the following in US dollars: 12468*1.3231= $16496.41

the percentage return is= amount received-amount invested/amount invested*100

16496.41-9831.53/9831.53*100= 67.80%

amount invested in $= 18.07*400*1.3602=$9831.53

jeff jeffy answered 2 years ago
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