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LOS c: Calculate the impact of different national taxes on the return of an international investment. ffice ffice" />
Q1. Simon Rosen, CFA, a portfolio manager for the Asian Spec Fund, recently purchased 1,000 shares of China Petroleum at a price of 271.11 Chinese yuan (CY) on the Shanghai Stock Exchange. The current exchange rate at the time was 8.2781 CY to one U.S. dollar (USD). China Petroleum paid an annual dividend of 9.02 CY per share and dividends are subject to 10 percent withholding tax. Capital gains taxes and dividends are 20 percent for the U.S. Simon sold all of his holdings in China Petroleum one year later at a price of 325.33 CY. Assume that the ffice:smarttags" />U.S. tax laws allow a full tax credit for taxes paid on international investments. Further assume that over the course of the year, exchange rates remained constant. The amount of tax credit available for dividends (in U.S. dollars) is:
A) USD 1,089.62.
B) USD 902.00.
C) USD 108.96.
Correct answer is C)
CY dividend paid = 9.02 CY × 1,000 = 9,020 CY
Tax withheld available for tax credit = 9,020 × 10% = 902 CY
Tax credit in US dollars = 902 CY / 8.2781 CY/USD = USD 108.96
Q2. Simon Rosen, CFA, a portfolio manager for the Asian Spec Fund, recently purchased 1,000 shares of China Petroleum at a price of 271.11 Chinese yuan (CY) on the Shanghai Stock Exchange. The current exchange rate at the time was 8.2781 CY to one USD. China Petroleum paid an annual dividend of 9.02 CY per share and dividends are subject to 10 percent withholding tax. Capital gains taxes and dividends are 20 percent for the U.S. Simon sold all of his holdings in China Petroleum one year later at a price of 325.33 CY. Assume that the U.S. tax laws allow a full tax credit for taxes paid on international investments. Further assume that over the course of the year, exchange rates remained constant. The amount of capital gain after taxes are paid on the sale (in U.S. dollars) is:
A) USD 5,239.85.
B) USD 43,376.05.
C) USD 6,549.81.
Correct answer is A)
Gross proceeds on the sale (USD) = (325.33 CY × 1000 shares) / 8.2781 CY/USD = USD39,300.08
Cost of investment (USD) = (271.11 CY × 1000 shares) / 8.2781 CY/USD = USD32,750.27
Gross capital gain (USD) = USD39,300.08 – USD32,750.27 = USD6,549.81
Net capital gain after tax = USD6,549.81 × (1 – 0.20) = USD5,239.85
Q3. Simon Rosen, CFA, a portfolio manager for the Asian Spec Fund, recently purchased 1,000 shares of China Petroleum at a price of 271.11 Chinese yuan (CY) on the Shanghai Stock Exchange. The current exchange rate at the time was 8.2781 CY to one U.S. dollar (USD). China Petroleum paid an annual dividend of 9.02 CY per share and dividends are subject to 10% withholding tax. Capital gains taxes and dividends are 20% for the U.S. Simon sold all of his holdings in China Petroleum one year later at a price of 325.33 CY. Assume that the U.S. tax laws allow a full tax credit for taxes paid on international investments. Further assume that over the course of the year, exchange rates remained constant. The total after tax return on this investment is:
A) 18.66%.
B) 20.00%.
C) 18.99%.
Correct answer is A)
Gross proceeds on the sale (USD) = (325.33 CY × 1,000 shares) / 8.2781 CY/USD = USD39,300.08
Cost of investment (USD) = (271.11 CY × 1,000 shares) / 8.2781 CY/USD = USD32,750.27
Gross capital gain (USD) = USD39,300.08 ? USD32,750.26 = USD6,549.81
Net capital gain after tax = USD6,549.81 × (1 ? 0.20) = USD5,239.85
CY dividend paid = 9.02 CY × 1000 = 9,020 CY
Dividend Paid (USD) = 9020 CY / 8.2781 CY/USD = USD1,089.62
Dividend received after withholding tax = USD1,089.62 × (1 ? 0.10) = USD980.66
U.S. Taxes on dividends = USD1,089.62 × 20% = USD217.92
Tax withheld available for tax credit = 9,020 × 10% = 902 CY
Tax credit in US dollars = 902 CY / 8.2781 CY/USD = USD 108.96
Total after-tax return = [(5,239.85 + 980.66) ? 217.92 + 108.96] / 32,750.26 = 18.66%
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发表于 2009-3-5 09:38
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