Franois (a French international investor) just sold a share of 'Bank Du Paris' for 4,921. The share

François (a French international investor) just sold a share of 'Bank Du Paris' for €4,921. The share was bought for €3.917 a year ago. The exchange rate is €1.20/$ now and was €1.78/$ a year ago. The investor received €225 as a cash dividend immediately before the share was sold.

a. Compute the rate of return on this investment in terms of U.S. dollars.

b.Suppose that François sold €4,921 forward at the forward exchange rate of €1.57 per dollar. How would this affect the dollar rate of return on this euro stock investment? In hindsight, should François have sold the euro amount forward or not? Why or why not?

Answer rating: 100% (QA)

a To compute the rate of return on this investment in terms of US dollars we need to convert all the ... View the full answer