You purchased $50,000 worth of stock in a Mexican corporation when the exchange

Question

You purchased $50,000 worth of stock in a Mexican corporation when the exchange rate was 10 pesos per dollar and the share price was 25 pesos. During the time you held the stock, you received a dividend of 8 pesos per share, which you convert back to dollars at a rate of $.065/peso. After a year, you sold all your stock when the exchange rate was $1.00 = 16 pesos and the share price was 20 pesos. Find your return in terms of dollars. Round intermediate steps and your final answer to four decimals

Explanation / Answer

Purchase cost of stock in $ = $50000

Worth of stock in pesos = $50000 x 10 pesos = 500000 pesos

No. of shares = 500000 pesos / 25 pesos = 20000 shares

Dividend in pesos = 20000 shares x 8 pesos = 160000 pesos

Dividend in $ = 160000 x 0.065 = $10400

Sale price in pesos = 20000 shares x 20 pesos = 400000 pesos

Sale price in $ = 400000 / 16 = $25000

Return = [Sale price - Purchase cost + Dividend] / Purchase cost x 100

= [25000 - 50000 + 10400] / 50000 x 100

= -29.20%

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