Instruction 13.1: Use the Information to Answer the Following Question(s)

question 65

Multiple Choice

Instruction 13.1:
Use the information to answer the following question(s) .
In September 2009 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 13.1. At the end of the year the investor sells his stock that now has an average price per share of €57. What is the investor's average rate of return after converting the stock back into dollars?

• A) -1.35%
• B) 5.0%
• C) -5.0%
• D) -7.24%

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Definitions:

Net Operating Profit After Taxes (NOPAT)

A company's operating profit after adjusting for taxes, reflecting the potential cash earnings if the company had no debt.

EBIT

Earnings Before Interest and Taxes; a measure of a firm's profit that includes all income and expenses except interest and income tax expenses.

Income Statement

A financial statement that shows a company's income and expenses over a specific period, culminating in net profit or loss.

After-Tax Income

The amount of income an individual or corporation retains after all applicable taxes have been deducted.