Question

An Australian investor bought shares in British Telecom at the start of the year for £108 per share and sold them at the end of the year for £122 per share. During the year they paid a dividend of £9 per share. Over the year, the exchange rate went from A$1.84/£ to A$1.82/£. What was the total Australian dollar return, in percent, on this investment for the year?  (if your answer is 18.85%, please enter 0.1885, not 18.85%) An Australian investor bought shares in British Telecom at the start of the year for £108 per share and sold them at the end of the year for £122 per share. During the year they paid a dividend of £9 per share. Over the year, the exchange rate went from A$1.84/£ to A$1.82/£. What was the total Australian dollar return, in percent, on this investment for the year?  (if your answer is 18.85%, please enter 0.1885, not 18.85%)

Answer 1

Australian investor purchased shares of British Telecom for 108 pounds per share and sold it for 122 pounds per share.

Purchase price = 108 pounds = 108 * 1.84 = $ 198.72

Sale Price = 122 pounds = 122 * 1.82 = $ 222.04

He received a dividend of 9 pounds during the year, we convert the dividend in Australian Dollars at average price of the year.

Average exchage rate = (1.84+1.82) / 2 = $ 1.83 per pound.

Dividend = 9 pounds = 9 * 1.83 = $ 16.47

Return on stock = Sale Price - Purchase price + Dividend

                          = 222.04-198.72+16.47 = $ 39.79

Return on stock in percentage = Return / Purchase price

                                                 = 39.79 / 198.72 = 20.02% = 0.2002

Thus, return on British Telecom stock in Australian dollars is 0.2002 (i.e,20.02%).