You decide to invest in an Australian stock with cash flows demoninated in Australian dollars. At the time of purchase, the stock traded at A$45/share and the exchange rate was A$1.5/US$. Find your rate of return (in US dollars) if the stock trades for A$30 and the exchange rate is A$1.2/US$ when you close your position. -.3333 -.4667 -.1667 Cannot be determined

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You decide to invest in an Australian stock with cash flows demoninated in Australian dollars. At the time of purchase, the stock traded at A$45/share and the exchange rate was A$1.5/US$. Find your rate of return (in US dollars) if the stock trades for A$30 and the exchange rate is A$1.2/US$ when you close your position.

-.3333

-.4667

-.1667

Cannot be determined

0

Answer: -.1667

 

Working notes for the above answer is as under

we have been given that , At the time of purchase, the stock traded at A$45/share and the exchange rate was A$1.5/US$.

 

So at the time of purchase what we have in dollar is

=45 /1.5

= A$30/share

Now , the stock trades for A$30 and the exchange rate is A$1.2/US$ when you close your position

 

So what we have at the time of losing is 30/1.2

=What You receive is $ 25

So previously at the time of purchase your value in us$ 30

Now at the time of trade its vale is Us$ 25

So upon return in $ is

= US$30- US$-25

= US$5

Particular Amount in $
Purchase  value 30
Sale Value 25
Return -5

 

 

Now we will calculate return

=  -5/30

=  -0.1667

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