In July 2009, an American investor buys 1,000 shares in a Mexican company at a price of 500 pesos each. The share does not pay any dividend. A year later she sells the shares for 550 pesos each. The exchange rates when she buys the stock are shown in Table 27.1 . Suppose that the exchange rate at the time of sale is peso 16.0/$.

a. How many dollars does she invest?

b. What is her total return in pesos? In dollars?

c. Do you think that she has made an exchange rate profit or loss? Explain.

AppendixLO1