Question

Calculate the dollar-based percentage return an American would have if he bought a British stock at ₤50 per share and sold it one year later at ₤60.

The spot exchange rate one year ago was $1.50 = ₤1 and the spot rate prevailing at the end of the year was $1.20 = ₤1.

Answer 1

16% returns

Step-by-step explanation:

initial cost: e50

sales price e60

returns (e10).

to ($)

initial cost = $75 (1.5*e50)

returnns = $12 (e10*1.2)

percentage: $12/ $75 *100

= 16%