Joe? Martinez, a U.S. citizen living in? Brownsville, Texas, invested in the common stock of? Telmex, a Mexican corporation. He purchased 3,000 shares at 18.50 pesos per share. Twelve months? later, he sold them at 26.75 pesos per share. He received no dividends during that time.
a. What was? Joe's investment return? (in percentage? terms) for the? year, on the basis of the peso value of the? shares?
b. The exchange rate for pesos was 8.33 pesos per? US$1.00 at the time of the purchase. At the time of the? sale, the exchange rate was 8.78 pesos per? US$1.00. Translate the purchase and sale prices into? US$.
c. Calculate? Joe's investment return on the basis of the? US$ value of the shares.
d. Explain why the two returns are different. Which one is more important to? Joe? ? Why?