Question

BierCo is a beer company based in Germany. You purchased the stock in 2011 for 100 Euros when the exchange rate was 1.4 EUR/ USD. Today BierCo's price is 120 Euros and the exhange rate is 1.12 EUR/USD. What is the dollar-denominated total return? Express in decimal total return format (i.e., 0.01 represents 1%).

Answer 1

Decimal total dollar denominated return is 0.50

Step-by-step explanation:

The dollar purchase price of the stock =100/1.4*$1

=71.42857143 *$1

=$71.42857143

today's dollar selling price =120/1.12*$1

=107.1428571 *$1

=$107.1428571

Dollar denominated total return in money terms=$107.1428571 -$71.42857143

=$35.71428571

However the dollar-denominated return in percentage terms is computed the below formula

dollar denominated return %=(today's price-initial price)/initial price

=($107.1428571 -$71.42857143 )/$71.42857143

=0.50 which represents 50%