Show all formulas Joe? Martinez, a U.S. citizen living in? Brownsville, Texas, i
ID: 1174704 • Letter: S
Question
Show all formulas
Joe? Martinez, a U.S. citizen living in? Brownsville, Texas, invested in the common stock of? Telmex, a Mexican corporation. He purchased 5,000shares at24.00
pesos per share. Twelve months? later, he sold them at32.50pesos per share. He received no dividends during that time.
a.??What was? Joe's investment return? (in percentage? terms) for the? year, on the basis of the peso value of the? shares?
b.??The exchange rate for pesos was11.52 pesos per? US$1.00 at the time of the purchase. At the time of the? sale, the exchange rate was12.00pesos per? US$1.00. Translate the purchase and sale prices into? US$.
c.??Calculate? Joe's investment return on the basis of the? US$ value of the shares.
Explanation / Answer
a)Investment Return in terms of Peso =( Price after 12 months - Price at beginning)/Price at beginning = (32.50 -24)/24 = 35.42%
b) The Purchase price of share in US dollar = 24 * 1/11.52 = 2.0833$
Sales price of share in US dollars = 32.50 * 1/12 = 2.7083$
c. Joe's Investment return in US dollars = (Sales price of share- Purchase price of share)/Purchase price of share = (2.7083 -2.0833)/2.0833 = 30.00%
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