Instruction 16.1: Use the Information to Answer Following Question(s)

question 25

Multiple Choice

Instruction 16.1:
Use the information to answer following question(s) .
In September 2002 a U.S. investor chooses to invest $500,000 in German equity securities at a then current spot rate of $1.30/euro. At the end of one year the spot rate is $1.35/euro.
-Refer to Instruction 16.1. At the end of the year the investor sells his stock that now has an average price per share of euro 57. What is the investor's average rate of return before converting the stock back into dollars?

• A) 5.0%
• B) -3.0%
• C) -5.0%
• D) 3.0%

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue; often called the bottom line.

Marginal Rate

The rate at which one additional unit of a variable is accounted for in the cost-benefit analysis, commonly used in the context of taxation and production.

Tax Rate

The fraction of income or profits that an individual or company needs to pay to the government as tax.

Investment Decisions

The process of deciding where to allocate resources in order to generate the highest possible returns.