Question

Spencer Grant is a New York-based investor. He has been closely following his investment in 200 shares of Vaniteux, a French firm that went public in February 2010. When he purchased his 200 shares at 16.68 euro per share, the euro was trading at $1.3654/euro. Currently, the share is trading at 28.37 euro per share, and the dollar has fallen to $1.4016/euro.  Spencer considers selling his shares at this time but he chooses not to sell them after all. He waits, expecting the share price to rise further after the announcement of quarterly earnings. His expectations area correct, and the share price rises to 31.62 euro per share after the announcement. The current spot exchange rate is $1.3022/euro.

a. If Spencer sells his shares today, what percentage change in the share price would he receive? (Round to two decimal places)

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

c b.) The sales proceeds in U.S Dollars is $ _______ (Round to the nearest cent)

c c.) The original investment (cost) of 200 shares in Vaniteux in euros is _____ (Round to two decimal places)

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

c e.) The rate of return on Spencer's investment, net proceeds divided by initial investment is ____ % (Round to two decimal places)

Answer 1

Please refer to the two attached pics for the solution to your question.

Total return earned by Spencer = $8235.11 - $4554.97 = $3680.14