(a) James is US investor, just sold a share of BMW company from German with €5,650. The share was bought for €4950 a year ago. The exchange rate is €0.84 per dollar now and was €0.85 per dollar a year ago. James received €90 as a cash dividend immediately before the share was sold. Compute the rate of return in this investment in terms of U.S dollars. (b) George is an investor from Canada. He owns one bond which located in London Stock Exchange (LSE). The bond has issued with coupon rate of 10 percent and face value at CND1,000. At the end of the year the bond was priced at CND1,100. Because of the bond will mature in one year, the exchange rate goes from $1.2443/CND to $1.3545/CND. Determine the rate of return in dollar terms with total dividend is CND25.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
icon
Concept explainers
Question
(a) James is US investor, just sold a share of BMW company from German with
€5,650. The share was bought for €4950 a year ago. The exchange rate is €0.84
per dollar now and was €0.85 per dollar a year ago. James received €90 as a cash
dividend immediately before the share was sold. Compute the rate of return in this
investment in terms of U.S dollars.
(b) George is an investor from Canada. He owns one bond which located in
London Stock Exchange (LSE). The bond has issued with coupon rate of 10
percent and face value at CND1,000. At the end of the year the bond was priced at
CND1,100. Because of the bond will mature in one year, the exchange rate goes
from $1.2443/CND to $1.3545/CND. Determine the rate of return in dollar terms
with total dividend is CND25.
Transcribed Image Text:(a) James is US investor, just sold a share of BMW company from German with €5,650. The share was bought for €4950 a year ago. The exchange rate is €0.84 per dollar now and was €0.85 per dollar a year ago. James received €90 as a cash dividend immediately before the share was sold. Compute the rate of return in this investment in terms of U.S dollars. (b) George is an investor from Canada. He owns one bond which located in London Stock Exchange (LSE). The bond has issued with coupon rate of 10 percent and face value at CND1,000. At the end of the year the bond was priced at CND1,100. Because of the bond will mature in one year, the exchange rate goes from $1.2443/CND to $1.3545/CND. Determine the rate of return in dollar terms with total dividend is CND25.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Exchange Rate Risk
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education