You are an American investor holding some German stocks. Over the month, the value of your
stock portfolio goes from €5 million to €5.2 million. The exchange rates move from $1 per euro
to $0.98 per euro.
a. What is your rate of return in euros?
b. What is your rate of return in dollars?
c. Is the difference between the dollar return and the euro return exactly equal to the percentage movement in the exchange rate? If not, why?

Question

Quizplus · Accepted Answer

The Answer of You are an American investor holding some German stocks. Over the month, the value of your
stock portfolio goes from €5 million to €5.2 million. The exchange rates move from $1 per euro
to $0.98 per euro.
a. What is your rate of return in euros?
b. What is your rate of return in dollars?
c. Is the difference between the dollar return and the euro return exactly equal to the percentage movement in the exchange rate? If not, why?

You Are an American Investor Holding Some German Stocks