Chapter 15 Mr. James K. Silber, an avid international investor, just sold a share of Nestlé, a Swiss firm, for SF5,080.
Posted: Thu May 05, 2022 7:57 am
Chapter 15
Mr. James K. Silber, an avid international investor, just sold a
share of Nestlé, a Swiss firm, for SF5,080. The share was bought
for SF4,600 a year ago. The exchange rate is SF1.60 per U.S. dollar
now and was SF1.78 per dollar a year ago. Mr. Silber received SF120
as a cash dividend immediately before the share was sold. Compute
the rate of return on this investment in terms of U.S. dollars.
Hint: You can solve the problem in different ways.
One way is that you can first convert all the SF amount into $
amount, then get the return based on dollar amount (same as your
learned from Fin301 and Fin307 class).
The other way is that you follow the formula in this Chapter
(see Chapter 15 Slides) . that is, first figure out the return in
SF term and the rate of change in FX rate. Then use the
formula.
Mr. James K. Silber, an avid international investor, just sold a
share of Nestlé, a Swiss firm, for SF5,080. The share was bought
for SF4,600 a year ago. The exchange rate is SF1.60 per U.S. dollar
now and was SF1.78 per dollar a year ago. Mr. Silber received SF120
as a cash dividend immediately before the share was sold. Compute
the rate of return on this investment in terms of U.S. dollars.
Hint: You can solve the problem in different ways.
One way is that you can first convert all the SF amount into $
amount, then get the return based on dollar amount (same as your
learned from Fin301 and Fin307 class).
The other way is that you follow the formula in this Chapter
(see Chapter 15 Slides) . that is, first figure out the return in
SF term and the rate of change in FX rate. Then use the
formula.