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2022 International investment (7)
11. The shares of Microsoft were trading on NASDAQ on January 1 at $41. A Swedish
investor purchased 100 shares of Microsoft at that price. The Swedish kroner to dollar
exchange rate then was $:Skr = 9.4173-9.4188. One year later, the investor received a
dividend of $2 per share, and the investor then sold the shares at a price of $51 per
share. The exchange rate at that time was $:Skr = 9.8710-9.8750. The dividend with-
holding tax rate in the United States is 15 percent and there is a tax treaty between the
United States and Sweden that allows the U.S. withholding tax to be used as a tax credit
in Sweden. Suppose the Swedish investor is taxed at 50 percent on income and 15 per-
cent on capital gains, and ignore any commissions on purchase and sale of shares.
a. What is the gross rate of return on the investment, in dollars?
b. What is the gross rate of return on the investment, in kroners?
c. What is the rate of return on the investment, in kroners, net of taxes?