Question
Question regarding Trading International Assets: The shares of Volkswagen trade on the Frankfurt stock exchange. A U.S. investor purchased 1,000 shares of Volkswagen at 56.91
Question regarding Trading International Assets:
The shares of Volkswagen trade on the Frankfurt stock exchange. A U.S. investor purchased 1,000 shares of Volkswagen at 56.91 each, when the exchange rate was 0.9790 0.9795$/. Three months later, the investor received a dividend of 0.50 per share, and the investor decided to sell the shares at the then prevailing price of 61.10 per share. The exchange rate was 0.98100.9815$/. The dividend withholding tax rate in Germany is 15% and there is a tax treaty between the U.S. and Germany to avoid double taxation. a) How much did the U.S. investor receive in dividends in dollars, net of tax? (Hint: Use the ask Forex rate if the U.S. investor buy euro, and bid rate if the U.S. sell euro.) b) What were the capital gains from the purchase and sale of Volkswagen shares? (Hint: capital gain is defined as (selling price-purchase price)*number of shares. Moreover, selling price and purchase price need to be measured in dollar terms.)
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