Question

Instruction 13.1:

In September 2009 a U.S. investor chooses to invest $500,000 in German equity securities at a then current spot rate of $1.30/euro. At the end of one year the spot rate is $1.35/euro.

7) Refer to Instruction 13.1. How many euros will the U.S. investor acquire with his initial $500,000 investment?

A) €650,000

B) €370,370

C) €500,000

D) €384,615

8) Refer to Instruction 13.1. At an average price of €60/share, how many shares of stock will the investor be able to purchase?

A) 8333 shares

B) 6410 shares

C) 6173 shares

D) 10,833 shares

9) Refer to Instruction 13.1. At the end of the year the investor sells his stock that now has an average price per share of €57. What is the investor's average rate of return before converting the stock back into dollars?

A) 5.0%

B) -3.0%

C) -5.0%

D) 3.0%

10) Refer to Instruction 13.1. At the end of the year the investor sells his stock that now has an average price per share of €57. What is the investor's average rate of return after converting the stock back into dollars?

A) -1.35%

B) 5.0%

C) -5.0%

D) -7.24%

Can you please provide a detailed solution with the formula/reasoning behind solving this question please? I know you're only supposed to answer one question but I feel like all of them is needed to provide context on the last question

Answer 1