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MexicoTech, a Mexican company is offering ADRs in the US stock market. Presently its stock is traded in Mexico at 440 pesos per share while the peso exchange rate against the US dollar is 11 pesos per dollar. There are 500 shares of stock in each ADR bundle.

a. What is the $ value of an ADR bundle of this Mexican stock?

b. Suppose the peso depreciates by 12%. What is the effect of this depreciation on the value of MexicoTech's ADRs? Show your calculation.

c. The effect of the 12% depreciation on MexicoTech in Mexico has been quite positive and the value of its stock has increase to 465 pesos per share. Calculate the effect of the combination of these two changes on the value of MexicoTech's ADRs.

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9685611

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