PRINCIPLES OF CORPORATE FINANCE
13th Edition
ISBN: 9781264052059
Author: BREALEY
Publisher: MCG
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Chapter 27, Problem 13PS
a)
Summary Introduction
To determine: The number of dollars person X invest.
b)
Summary Introduction
To determine: Total return in dollar and pesos.
c)
Summary Introduction
To determine: Whether person X made exchange rate loss or profit.
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Students have asked these similar questions
Suppose you are a euro-based Italian investor, and you are investing €11, 600 to buy shares of a
British company at £50 per share. The exchange rate is €1.45 per pound. The stock pays a £1 dividend
one year later, and you sell your shares for £53. The exchange rate has changed to €1.50 per pound
at the time of your sale. What is your pound rate of return on this investment and the change in pound
- euro exchange rate? What is your euro rate of return? If you had agreed at the outset to sell £8,000
forward at the rate of €1.36 per pound, what is your euro rate of return on this investment?
Required:
Suppose you are a euro-based investor who just sold Microsoft shares that you had bought six months ago. You had invested 10,000
euros to buy Microsoft shares for $120 per share; the exchange rate was $1.06 per euro. You sold the stock for $162 per share and
converted the dollar proceeds into euro at the exchange rate of $0.97 per euro. First, determine the profit from this investment in euro
terms. Second, compute the rate of return on your investment in euro terms. How much of the return is due to the exchange rate
movement?
Note: Do not round intermediate calculations. Round 'profit' to the nearest whole number. Enter your answer as a percent
rounded to 2 decimal places.
Profit
Rate of return
%
Rate of return due to exchange rate movement
%
Suppose you are a euro-based Italian investor, and you are investing €10,400 to buy shares of a British company at £50 per share. The exchange rate is €1.30 per pound. The stock pays a £1 dividend one year later, and you sell your shares for £56. The exchange rate has changed to €1.35 per pound at the time of your sale. What is your pound rate of return on this investment and the change in pound-euro exchange rate? What is your euro rate of return? If you had agreed at the outset to sell £8,000 forward at the rate of €1.33 per pound, what is your euro rate of return on this investment? Note: Enter your answer as a percent rounded to 2 decimal places.
Chapter 27 Solutions
PRINCIPLES OF CORPORATE FINANCE
Ch. 27 - Exchange rates Look at Table 27.1. a. How many...Ch. 27 - Exchange rates Table 27.1 shows the 3-month...Ch. 27 - Prob. 3PSCh. 27 - Prob. 4PSCh. 27 - Prob. 5PSCh. 27 - Prob. 6PSCh. 27 - Prob. 8PSCh. 27 - Prob. 9PSCh. 27 - Prob. 10PSCh. 27 - Currency risk Companies may be affected by changes...
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