Suppose an investor buys a share of Sony at a price of ¥38,720 at the start of the year. During the year, the investor receives a dividend of ¥500. At the end of the year, the price of Sony is ¥49,560. During the year, the exchange rate goes from ¥150 = $1 to ¥175 = $What was the investor's dollar return on Sony?

Question

Quizplus · Accepted Answer

First, we need to calculate the yen return on Sony:

Yen return = (Ending price + Dividends - Starting price) / Starting price = (49,560 + 500 - 38,720) / 38,720 = 0.291

Next, we need to convert the yen return to dollars using the exchange rate at the end of the year:

Dollar return = Yen return x End of year exchange rate = 0.291 x (1/175) = 0.01082

Therefore, the investor's dollar return on Sony is 10.82% (rounded to two decimal places), which corresponds to choice B.

Suppose an Investor Buys a Share of Sony at a Price