(a)
To calculate:
The number of shares that an investor can purchase by investing
Introduction:
For investing in a British firm, investor of U.S. has to change its funds into the pound and then should compute the number of shares which he can invest in the firm.

Answer to Problem 3PS
The number of shares that can be purchased by investor in British firm is
Explanation of Solution
Given:
To calculate total number of shares, first total investment given in dollars should be converted to Euro which is calculated on the basis of Rate of Exchange and then, the total investment should be divided with current price per share.
Thus, number of shares that can be purchased is
(b)
To calculate:
The
Introduction:
For investing in a British firm, investor of U.S. has to change its funds into the pound and then should compute the number of shares which he can invest in the firm.

Answer to Problem 3PS
Below table highlights the values for all nine cases:
Per share price (£) | Pound-Denominated Return (%) | Dollar-Denominated Return (%) for year-end exchange Rate | ||
£ |
||||
£ |
||||
£ |
Explanation of Solution
Given:
Let's first calculate the pound-denominated return and for that, the following formula is used:
By using the above formula, Pound-denominated return is computed as follows:
Per share price (£) | Pound-Denominated Return (%) |
Now, calculate the dollar-denominated return and for that, the following formula is used:
By using the above formula, Dollar-denominated return is computed as follows:
Per share price (£) | Dollar-Denominated Return (%) for year-end exchange Rate | ||
(c)
To calculate:
The situation in which the dollar-denominated return will be equal to the pound-denominated return.
Introduction:
For investing in a British firm, investor of U.S. has to change its funds into the pound and then should compute the number of shares which he can invest in the firm.

Answer to Problem 3PS
The situation is when there will be no change in the exchange rates.
Explanation of Solution
Given:
The dollar denomination returns will be equal to the pound denomination return when there is no change over the exchange rate in one year even if the price of the share changes.
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Chapter 25 Solutions
INVESTMENTS-CONNECT PLUS ACCESS
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