A U.S. investor purchased some shares in Germany for 25 euros and sold them a year later for 42 euros. If at the beginning of the year the exchange rate was $1.20/euro and at the end of the year the exchange rate was $1.05/euro, what return did this investor earn in U.S. dollars?
A) 47.0%
B) 92.0%
C) 55.5%


The correct answer is: a)

(Return in US$)
= (1 + Return on Foreign Currency) x (1 + Return on Investment in Foreign Currency) - 1
Therefore, (1 + Return on Foreign Currency) = ($1.05/euros) ÷ ($1.20/euros) = 0.875
and (1 + Return on Investment in Foreign Currency) = 42 euros ÷ 25 euros = 1.68
Thus, (Return in US$) = (0.875)(1.68) - 1
                                  = 0.47 or 47%


  1. A church that a registered representative (RR) attends plans to raise the funds necessary ...

    The correct answer is c) Although church bonds are normally considered to be exempt securities, the RR is obligated, by NASD ...
  2. Which of the following statements is (are) true with respect to the calculation of ...

    The correct answer is: a) (I) is incorrect because results that cover a period of less than a year must "not" be annualized. ...
  3. Which of the following terms are associated with the purchase/redemption of open-end ...

    The correct answer is b. Forward pricing is the SEC Rule that requires all transactions in open-end investment company shares ...
  4. Joanne Bume, CFA, is the head of research at large brokerage firm ...

    The correct answer is: a) The proper course of action would simply be to place Universal Airlines on a restricted list until ...
  1. No results found.

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!