One year ago, a U. S. investor converted dollars to yen and purchased 100 shares of stock in a Japanese company at a price of 3,150 yen per share. The stock's total purchase cost was 315,000 yen. At the time of purchase, in the currency market 1 yen equaled $0.00952. Today, the stock is selling at a price of 3,465 yen per share, and in the currency market $1 equals 145 yen. The stock does not pay a dividend. If the investor were to sell the stock today and convert the proceeds back to dollars, what would be his realized return on his initial dollar investment from holding the stock?

Question

Business

Valerie Farmer

24 March, 21:23

One year ago, a U. S. investor converted dollars to yen and purchased 100 shares of stock in a Japanese company at a price of 3,150 yen per share. The stock's total purchase cost was 315,000 yen. At the time of purchase, in the currency market 1 yen equaled $0.00952. Today, the stock is selling at a price of 3,465 yen per share, and in the currency market $1 equals 145 yen. The stock does not pay a dividend. If the investor were to sell the stock today and convert the proceeds back to dollars, what would be his realized return on his initial dollar investment from holding the stock?

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Hanson · Answer 1

Answer: - 20.31%

Explanation:

A year ago, a United States investor converted dollars to yen and bought 100 shares of stock in a Japanese company at price of 3,150 yen per share. At that time of purchase, 1 yen equaled $0.00952.

Total cost = 3150*100 yen = 315000 yen

= 315000 * 0.00952 = $2998.8

Today, the stock sells at a price of 3,465 yen per share, and in the currency market $1 equals 145 yen.

Total selling price=3465 * 100 = 346500 yen = 346500/145 = $2389.7

Return = (2389.7-2998.8) * 100/2998.8

= - 20.31%