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In January 2012, an American investor buys 1,000 shares in

In January 2012, an American investor buys 1,000 shares in a Mexican company at a price of 500 pesos each. The share does not pay any dividend. A year later she sells the shares for 550 pesos each. The exchange

In January 2012, an American investor buys 1,000 shares in a Mexican company at a price of 500 pesos each. The share does not pay any dividend. A year later she sells the shares for 550 pesos each. The exchange rates when she buys the stock are shown in Table 27.1. Suppose that the exchange rate at the time of sale is 15.7 pesos = $1.
a. How many dollars does she invest?
b. What is her total return in pesos? In dollars?
c. Do you think that she has made an exchange rate profit or loss? Explain.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...

In January 2012, an American investor buys 1,000 shares in a Mexican company at a price of 500 pesos each. The share does not pay any dividend. A year later she sells the shares for 550 pesos each. The exchange

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a Pesos invested 1 000 X 500 pesos 500 000 pesos Dollars invested 5…View the full answer

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