A U.S. company and a German company purchased the same stock on the German stock exchange and held the stock for 1 year. The value of the euro weakened against the dollar over this period Comparing the returns of the two companies the United States company’s return will be

Answer (A) is correct. The returns on the stock are presumably paid in euros. Hence, the change in the value of the euro relative to the dollar does not affect the German company’s return. However, the weakening of the euro reduces the number of dollars it will buy and the U S company’s return in dollars is correspondingly reduced