Suppose you are a euro-based investor who just sold Microsoft shares that you had bought six months ago.You had invested €10,000 to buy Microsoft shares for $120 per share; the exchange rate was $1.55 per euro.You sold the stock for $135 per share and converted the dollar proceeds into euro at the exchange rate of $1.50 per euro.Compute the rate of return on your investment in euro terms.

Question

Quizplus · Accepted Answer

First, calculate the number of shares bought: €10,000 / $1.55 = $6,451.61 / $120 ≈ 53.76 shares. Selling those shares at $135 each yields $7,257.60. Converting this back to euros at $1.50 per euro gives €4,838.40. The rate of return is then (€4,838.40 - €10,000) / €10,000 = -51.616% / €10,000 = 16.25%.

Suppose You Are a Euro-Based Investor Who Just Sold Microsoft