Question

Suppose that you invested USD $250,000 in British equity securities when spot rate was $1.2500/GBP at...

Suppose that you invested USD $250,000 in British equity securities when spot rate was $1.2500/GBP at an average price of GBP 84/share. Also, assume that the spot rate is $1.1905 and you sold your securities at the average price per share of GBP80/share and converted your money back to USD. What is your average rate of return after converting the stock back into dollars?

a. -9.3%

b. 9.3%

c. 4.85%

d. 5%

e. none of these

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Answer #1
a USD invested = 250000
b Exchange rate =                       1.25
c Number of unit bought = 250000/1.25/84               2,380.95
e Sale price= 80 per share
f Sales priceed in GBP =           190,476.19
g Fx rate on sale =                  1.1905
h=f*g Value received in usd =           226,761.90
I =h-a Loss on sale           (23,238.10)
j Loss % = i/a -9.3%
therefore correct answre is option : a -9.3%
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