How do changes in exchange rates affect an international investor's returns?
Calculate Deutsche Telekom's (ticker: D:DTE) annual stock returns using the closing stock price in euros at the end of each of the last five fiscal years.
Convert the closing stock price to U.S. dollars (to determine the exchange rate at the end of each fiscal year see footnote 7 in the previous problem).
Calculate the annual stock returns using U.S. dollar prices.
Which years have a higher return in U.S. dollars and which years in euros? As a U.S. investor, do you prefer a strong or a weak U.S. dollar relative to the euro?