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Suppose you are a euro-based investor who just sold Microsoft shares that you had bought six months ago. You had invested 10,000 euros to buy Microsoft shares for $120 per share; the exchange rate was $0.97 per euro. You sold the stock for $189 per share and converted the dollar proceeds into euro at the exchange rate of $0.88 per euro. First, determine the profit from this investment in euro terms. Second, compute the rate of return on your investment in euro terms. How much of the return is due to the exchange rate movement

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a) The profit from the investment is 7,360 euros.

b) The rate of return is 73.6%.

c) The amount of the return due to the exchange rate movement is 1,610 euros.

Data and Calculations:

Investment in Microsoft Corporation = 10,000 euros

Price per share = $120

Exchange rate = $0.97 per euro

Number of shares bought = 80.93 shares (10,000 euros x $0.97)$120

Selling price per share = $189

Sales proceeds = $15,277.50 (80.93 x $189)

Sales proceeds in euro = 17,360.80 euros ($15,277.50/$0.88)

a) Profit from the investment = 7,360 euros (17,360.80 - 10,000)

b) Rate of return = 73.6% (7,360/10,000 x 100)

Profit from the investment based on an exchange rate of $0.97 = 15,750 euros ($15,277.50/$0.97)

c) Amount of the return due to the exchange rate movement = 1,610 euros (17,360 - 15,750).

Learn more about exchange rate movements and returns at https://brainly.com/question/17884420

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