Question

I am getting B as an answer but the right one is D. Why?

1) You see the following quotations. How much would a U.S. investor gain or lose if s/he bought the Top Image stock in the United States and sold it in Israel? (The symbol for the Israeli currency, the shekel, is ILS.) Ask $1.00 ILS 6 Bid Top Image USD $0.98 Top Image ILS ILS 5 USD/ILS $0.25/ILS $0.30/ILS A) A gain of $1.10 stock per B) A gain of $0.50 per stock. C) A gain of $0.80 per stock. D) A gain of $0.25 per stock.

Answer 1

Purchase price of stock (in USD) = ask price of stock in USD = $1.00.

Sale price of stock (in ILS) = bid price of stock in ILS = ILS 5.

Sale price of stock (in USD) =  Sale price of stock (in ILS) * bid rate of $ per ILS

Sale price of stock (in USD) = 5 * 0.25 = $1.25.

Profit = sale price (in USD) - purchase price (in USD).

Profit = $1.25 - $1.00 = $0.25.