A simple question: When exchanging currency in order to finance an investment, is it standard/best practice to adjusted for exchange rates when calculating the NPL of that investment?
For example: I, a European, purchase 100 USD of american securities on Day 0, costing me 90 EUR @ a rate of 0.9 USD/EUR. At Day X, my security has seen growth to a market value of 120 USD, however today, the exchange rate is 0.8 USD/EUR. Is my return:
(120 * 0.8) - (100 * 0.8) = 16 EUR
(120 * 0.8) - (100 * 0.9) = 6 EUR
My intuition tells me calculation 2 is correct since I invested 90 EUR, and at Day X I have USD equivalence to 96 EUR? However, Yahoo Finance for example does not make these adjustments when calculating the Total Gain of portfolio.