Question

One year ago, a U.S. investor converted dollars to yen and purchased 100 shares of stock in a Japanese company at a price of 3,150 yen per share. The stock's total purchase cost was 315,000 yen. At the time of purchase, in the currency market 1 yen equaled $0.00962. Today, the stock is selling at a price of 3,465 yen per share, and in the currency market $1 equals 95 yen. The stock does not pay a dividend. If the investor were to sell the stock today and convert the proceeds back to dollars, what would be his realized return on his initial dollar investment from holding the stock? 21.41% 21.63% 20.96% 20.84% 20.36%

Answer 1

ANSWER

Given Information :

• EXCHANGE RATE AT TIME OF BUYING : 1Yen = $ 0.00962
• EXCHANGE RATE AT TIME OF SELLING : 1Yen = $ 0.010526

STEP 1 : CONVERT PURCHASE COST IN $

Purchse Cost in USD = Purchase Cost in Yen * Exchange Rate at time of Purchase

= Yen 315000 * $ 0.00962

= $ 3030.3

STEP 2 : CONVERT SALES VALUE IN $

Sales Value in USD = Sales Value in Yen * Exchange Rate at time of Sale

= Yen346500 * $ 0.010526

= $ 3647.259

STEP 3 : CALCULATE REALIZED RETURN ON $ INVESTMENT

Realized Return = { Sales Price (-) Cost } / Cost * 100

= (3647.259 - 3030.3) / 3030.3 * 100

= 20.36% approx

HOPE YOU ARE CLEAR NOW. STILL IF ANY DOUBT PLEASE ASK IN COMMENT :)