Suppose you buy a share of Siemens at a price of €83.During the year,you receive a dividend of €2 and the € rises by 8%.If the stock price at yearend is €80,what was your total dollar return for the year?

Question

Quizplus · Accepted Answer

First, you need to convert the euros to dollars using the exchange rate at the beginning of the year. €1 = $1.10 (since the euro has appreciated 8%, $1 is now worth €0.92 at year-end).
So, your initial investment of €83 is worth $91.30 ($83 x 1.10).
You received a dividend of €2, which is $2.20 ($2 x 1.10).
At year-end, the share price is €80, which is $73.60 ($80 x 0.92).
Your total return is the sum of the dividend and the capital gain or loss: 
Total return = (ending price + dividend - beginning price) / beginning price
Total return = ($73.60 + $2.20 - $91.30) / $91.30
Total return = -0.0921 or -9.21%
However, the question asks for the total dollar return, so you need to multiply the total return by 100 to get the percentage in dollars: 
Total dollar return = -9.21% x $91.30
Total dollar return = -$8.39
Since the total dollar return is negative, you lost money on this investment. The closest answer choice is B) 6.70%, which is your nominal dividend yield.

Suppose You Buy a Share of Siemens at a Price