Question
In: Finance
In September 2014, a U.S. investor chooses to invest $500,000 in German equity securities at a...
In September 2014, a U.S. investor chooses to invest $500,000 in German equity securities at a then current spot rate of $1.25/euro. At the end of one year the spot rate is $1.45/euro.
How many German equity shares will the U.S. investor acquire with his initial $500,000 investment if the cost at purchase was €50?
What dollar return (in %) does an investor earn if they sell shares for €57 and the share cost at purchase was €50, given that the exchange rate has risen from $1.25/euro to $1.45/euro?
Solutions
Expert Solution
| Particulars | Amount |
| Investment in USD | 500,000.00 |
| / exchange rate spot | 1.25 |
| EURO investment | 400,000.00 |
| / price per share | 50.00 |
| Number of shares bought | 8,000.00 |
| Number of shares bought | 8,000.00 |
| × share price after one year | 57.00 |
| Amount realized in EURO | 456,000.00 |
| × exchange rate | 1.45 |
| Amount realized in USD | 661,200.00 |
| Less: investment | (500,000.00) |
| Return in USD | 161,200.00 |
| / investment in USD | 500,000.00 |
| Percent return in USD | 32.24% |
German equity shares bougt was 8,000
Percent return in USD is 32.24%
Dollar return is $161,200
Please rate.
jeff jeffy answered 1 year agoRelated Solutions
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