Suppose an investor buys a share of British Petroleum at a price of £32 at the start of the year.During the year,the investor receives a dividend of £1.5.At the end of the year,the price of BP is £34.During the year,the exchange rate goes from £1 = $1.78 to £1 = $1.63.What was the investor's dollar return on BP?

Question

Quizplus · Accepted Answer

The investor's dollar return is calculated by considering both the capital gain and the dividend received, adjusted for the change in exchange rate. The initial investment in dollars is £32 * $1.78 = $56.96. The final value in dollars is (£34 + £1.5) * $1.63 = $57.86. The dollar return is ($57.86 - $56.96) / $56.96 = 1.59%.

Suppose an Investor Buys a Share of British Petroleum at a Price