In Euros this would amount to 100,000/1.4950=66889.63. The ask rate is being used because the buyer of the share would first sell the Euros in the American market to get a 100,000 dollars to buy the shares. b) If you sell the shares you would receive 110,000 in USD. The buying rate would be used because the seller would have to buy the Euros from the market after selling in dollars. Therefore they would receive 110,000/1.4550 = 75601.37 Euros c) The cost of the broker when buying the shares= 100,000 *0.2%= 200 In Euros this cost would be 200/1.4950=133.77 Cost in Dollars = 100200 Cost in Euros =67023.409 Cost of the broker commission when selling the shares= 110,000 * 0.2%= 220 In Euros this cost would be= 220/1.4550=151,20, as the investor would buy from Dollars to pay the commission. The total proceeds would be 109,780 USD and 75752.58 Euro. 2 You are the manager of an American pension fund and decide, on January 5, to buy ten thousand shares of British Airways listed in London. You sell them on February 5. ...Show more
1 A U.S. broker has posted the following quotes (in USD) for the share of an electronic firm: Buying rate =100 and selling rate =110. The exchange rates for one euro are: Buying (bid) $1.4550 and Selling (ask) = $1.4950 net. Assume you are an investor living in Europe and answer the following questions: a How much will you pay in dollars if you buy 1000 shares of that firm?…
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