Amanda purchased stock in a German firm at a price per share of 35 euros when the U.S. $/euro exchange rate was $1.40. After six months, Ann sold the stock for 37 euros when the U.S. $/euro exchange rate was $1.28. The stock does not pay a dividend. What is Ann's rate of return on this investment?

Question

Quizplus · Accepted Answer

Ann's rate of return is calculated by considering both the change in stock price and the change in exchange rate. Initially, the stock cost her 35 euros * $1.40 = $49. After six months, she sold it for 37 euros * $1.28 = $47.36. The rate of return is (47.36 - 49) / 49 = -3.35%.

Amanda Purchased Stock in a German Firm at a Price