One year ago, a U.S. investor converted dollars to yen and purchased 100 shares
ID: 2719618 • Letter: O
Question
One year ago, a U.S. investor converted dollars to yen and purchased 100 shares of stock in a Japanese company at a price of 3,150 yen per share. The stock's total purchase cost was 315,000 yen. At the time of purchase, in the currency market 1 yen equaled $0.00952. Today, the stock is selling at a price of 3,465 yen per share, and in the currency market $1 equals 130 yen. The stock does not pay a dividend. If the investor were to sell the stock today and convert the proceeds back to dollars, what would be his realized return on his initial dollar investment from holding the stock?
Explanation / Answer
Purchase Price of 1 stock = 3150 yen
Stocks Total Purchase Cost in Dollars = 315000 * 0.00952 = $2998.8
No of shares = 100
Current Price of the Stock = 3465 yen
Current Exchange Rate is $1 = 130 yen
Total value of the shares today = 3465 * 100 = 346500 yen
Value of the shares today in dollars = 346500/130 = $2665.39
Realised Return on Initial Dollar Investment = [(2665.39 - 2998.8)/2998.8] * 100 = -11.12%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.