### Investment Scenario Analysis: A Case Study---**Background:**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.**Exchange Rate at Time of Purchase:**At the time of purchase, in the currency market:1 yen equaled $0.00893.**Stock’s Performance After One Year:**Today, the stock is selling at a price of 3,465 yen per share. In the current currency market:1 yen equals 127 yen.**Dividend Information:**The stock does not pay a dividend.**Objective:**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?---### Detailed Breakdown**Initial Investment Calculations:**1. **Total Cost in Yen:** - Purchase price per share: 3,150 yen - Number of shares: 100 - Total cost: 3,150 yen/share * 100 shares = 315,000 yen2. **Conversion to Dollars:** - Exchange rate: 1 yen = $0.00893 - Total cost in dollars: 315,000 yen * $0.00893/yen = $2,811.45**Current Value Calculations:**1. **Current Price per Share:** - Selling price per share: 3,465 yen - Total selling price for 100 shares: 3,465 yen/share * 100 shares = 346,500 yen2. **Conversion to Dollars:** - Current exchange rate: 1 yen = 127 yen**Return Calculation:**1. **Calculate Current Value in Dollars:** - Total selling price in yen: 346,500 yen - Exchange rate to convert back to dollars: 127 yen = $1 - Current value in dollars: 346,500 yen / 127 yen = $2,728.352. **Realized Return:** - Initial investment in dollars: $2,811.45 - Current value in dollars: $2,728.35 - Realized return: $2,728.35 - $2,811

Realized return is computed by following formula-Realized return =

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 $0.00893. Today, the stock is selling at a price of 3,465 yen per share, and in the currency market $1 equals 127 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?

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 $0.00893. Today, the stock is selling at a price of 3,465 yen per share, and in the currency market $1 equals 127 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?

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

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