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You purchased a share of a German firm's stock. The company did not pay out any dividends and the price of the stock rose by 15% over the year. In addition, the value of the Euro was $1.00 per Euro at the outset and it rose by 10% over the year. What was your total percentage rate of return in dollars for this investment

Respuesta :

jepessoa

Answer:

16.67%

Explanation:

Holding period return = [(actual value - purchase cost) + dividends received] / purchase cost.

First we can calculate the HPR in euros = [(1.15€ - 1€) + 0€] / 1€ = 0.15 = 15%

We now need to convert our earnings to US dollars. We will gain an additional 10% due to the currency appreciation of the euro:

total percentage rate of return = 15% / (1 - 10%) = 15% / 0.90 = 16.67%