23 June, 11:06

# ne 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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1. 23 June, 12:34
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realized loss = - 20.31%

Explanation:

stock price ¥3,150, total operation ¥315,000

in US dollars = ¥315,000 x \$0.00952 = \$2,998.80

current market price ¥3,465, total operation ¥346,500

in US dollars = ¥346,500 / ¥145 = \$2,389.66

realized loss = (current value in US dollars - initial investment) / initial investment = (\$2,389.66 - \$2,998.80) / \$2,998.80 = - 20.31%

Even though the stock price increased significantly (10%), the yen depreciated against the dollar even more (-38%)