You are a U.S.investor who purchased British securities for 2,000 pounds one year ago when the British pound cost $1.50.No dividends were paid on the British securities in the past year.Your total return based on U.S.dollars was __________ if the value of the securities is now 2,400 pounds and the pound is worth $1.60.

Question

Quizplus · Accepted Answer

To calculate the total return based on U.S. dollars, we need to convert the original investment and the final value of the securities into dollars using the exchange rates at the time of each transaction.

One year ago, when the pound was worth $1.50, the initial investment of 2,000 pounds was worth:

2,000 pounds x $1.50/pound = $3,000

Now, when the pound is worth $1.60, the final value of the securities in pounds (2,400 pounds) is worth:

2,400 pounds x $1.60/pound = $3,840

The total return based on U.S. dollars is therefore:

($3,840 - $3,000) / $3,000 x 100% = 28.0%

Therefore, the correct answer is C) 28.0%.

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