Calculate the Euro-Based Return an Italian Investor Would Have Realized

question 30

Essay

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock using 50 percent margin.One year after investment,the stock pays a £1 dividend,and sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound.The interest on the margin loan is 1 percent per year.The margin loan was denominated in pounds.

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Definitions:

Significant Noncash Activity

Transactions or activities that affect the financial statements of a company but do not involve cash inflow or outflow, such as depreciation or amortization.

Conversion of Bonds

The process where bondholders can exchange their bonds for a predetermined number of shares in the issuing corporation.

Plant Assets

Long-term tangible assets that are used in the operation of a business and are not intended for sale.

Transactions

The economic events of a business that are recorded by accountants.