Mr. James K. Silber, an avid international investor, just sold a share of Nestlé, a Sw iss firm, for SF5,080. The share was boug ht for SF4,600 a year ago. The exchange rate is SF1.60 per U.S. dollar now and wa s SF1.78 per dollar a year ago. Mr. Silber

Mr. James K. Silber, an avid international investor, just sold a share of Nestlé, a Sw iss firm, for SF5,080. The share was boug ht for SF4,600 a year ago. The exchange rate is SF1.60 per U.S. dollar now and wa s SF1.78 per dollar a year ago. Mr. Silber

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

Question

Mr. James K. Silber, an avid international
investor, just sold a share of Nestlé, a Sw
iss firm, for SF5,080. The share was boug
ht for SF4,600 a year ago. The exchange
rate is SF1.60 per U.S. dollar now and wa
s SF1.78 per dollar a year ago. Mr. Silber
received SF120 as a cash dividend immed
iately before the share was sold. Comput
e the rate of return on this investment in
terms of U.S. dollars.

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