A Peruvian investor buys 180 shares of a U.S. stock for $7,560 ($42 per share).

Question

A Peruvian investor buys 180 shares of a U.S. stock for $7,560 ($42 per share). Over the course of a year, the stock goes up by $3 per share.

If there is a 10 percent gain in the value of the dollar versus the nuevo sol, what will be the total percentage return to the Peruvian investor?

Now assume that the stock increases by $8, but that the dollar decreases by 10 percent versus the nuevo sol. What will be the total percentage return to the Peruvian investor? Use .90 in place of 1.10 in this case.

A Peruvian investor buys 180 shares of a U.S. stock for $7,560 ($42 per share). Over the course of a year, the stock goes up by $3 per share.

Explanation / Answer

Investment = $7,560 Total Gain from increase in share value 180*3 $   540 Total Gain = $8,100 Today Purevian sol to US Dollar is 1 Peruvian Nuevo Sol = $0.32 With 10% increase in US Dollar, Dollar will become weak 1 Peruvian Nuevo Sol = $0.29 Converting the Gain from Share price increase in Peruvian Nuevo - Old rate 23625 Converting the Gain from Share price increase in Peruvian Nuevo - New rate 28125 Return to investor = 19.05% Investment = $7,560 Total Gain from increase in share value 180*8 $1,440 Total Gain = $9,000 Today Purevian sol to US Dollar is 1 Peruvian Nuevo Sol = $0.32 With 10% increase in US Dollar, Dollar will become weak 1 Peruvian Nuevo Sol = $0.35 Converting the Gain from Share price increase in Peruvian Nuevo - Old rate 23625 Converting the Gain from Share price increase in Peruvian Nuevo - New rate 25568.2 Return to investor = 8.23%

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