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It is helpful first to calculate the rate of return in euro terms: the Rate of Return due to the exchange rate movement is 22%.
Profit = € 2,174.29
Rate of Return = 20%
Rate of Return due to exchange rate movement = 22%
Amount Invested in terms of Euros = € 10,000
The exchange rate at the time of buying = is $ 1.12 per euro
Amount invested in terms of dollars = 10,000 X 1.12
Amount invested in terms of dollars = $11,200
Buying Price = $120
Number of shares purchased = 11,200 / 120 = 93.33 shares
Selling Price = $144
Amount received by selling = 93.33 X 144
Amount received by selling = $ 13,439.52
Profit = Amount received by selling - Amount invested in terms of dollars
Profit = 13,439.52 - 11,200
Profit = 2,239.52
Profit in terms of euro = 2,239.52 / 1.03
Profit in terms of euro = 2,174.29
Therefore, Profit in terms of euros is € 2,174.29.
Rate of Return = [ Profit / Amount invested in terms of dollars] X 100
Rate of Return = [ 2,239.52 / 11,200] X 100
Rate of Return = 0.1999 X 100
Rate of Return = 19.99 or 20 (rounded to 1 decimal place)
Therefore, the Rate of Return is 20%.
Rate of Return due to exchange rate movement = [ Profit in terms of euros / Amount Invested in terms of Euros] X 100
Rate of Return due to exchange rate movement = [ 2,174 / 10,000] X 100
Rate of Return due to exchange rate movement = 0.2174 X 100
Rate of Return due to exchange rate movement = 21.74 or 22 (rounded to 1 decimal place)
Therefore, the Rate of Return due to the exchange rate movement is 22%.
within the medium term, moves in an alternate rate mirror such things as adjustments in interest price differentials, international competitiveness, and the relative economic outlook in each economic device. On an everyday foundation, changes in price movements may additionally reflect hypotheses or information and events that have an impact on the respective economies.
trade costs are continuously transferring, based on delivery and demand. whether or not one forex is in higher call for than any other, depends on the perceived cost of proudly owning it, either to pay for gadgets and services or as an investment. The exchange rate affects the real economy most straight away thru modifications within the call for exports and imports. A real depreciation of the domestic foreign money makes exports extra aggressive overseas and imports less aggressive domestically, thereby growing the call for domestically produced goods.
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