Question

Suppose a U.S. investor wants to invest in a British firm currently selling for ₤50 per share. The investor has $7,000 to invest, and the current exchange rate is $1.40/₤. How many shares can the investor purchase?

A. 140 B. 100

C. 71.43
D. noneoftheseoptions

Answer 1

Solution:

As per the information given in the question we have :

Total amount of US Dollars available for investment = $ 7,000

Exchange rate between Pound and US Dollar is

1 £ = $ 1.40

The total number of pounds that can be exchanged for US Dollars

= $ 7,000 / $1.4

= 5000 Pounds

Thus the total no. of Pounds that can be exchanged for US Dollars = £ 5000

We know that price per share in a given British firm = £ 50

No. of pounds available for investment = £ 5,000

Thus the total no. of shares of the British firm that can be bought is

= Amount available for investment in Pounds / Price per share in Pounds

= £ 5,000 / £ 50

= 100 shares

Thus the No. of shares that the US investor can purchase = 100

The solution is Option B. 100