1 Suppose you are a U.S. investor who is planning to invest $125,000 in Japan. You...

1 Suppose you are a U.S. investor who is planning to invest $125,000 in Japan. You do so at a starting exchange rate of 84.28 ¥/$. Your Japanese investment gains 7 percent, and the ending exchange rate is 88.65 ¥/$. What is your total return on this investment?

Solutions

Expert Solution

Amount Equivalent to Japanese investment = Spot exchange rate* Investment in $

= 84.28 *125000

=Yen 10535000

Investment Value in Yen after investment gain = 10,535,000 (1+.07) = Yen 11,272,450

Value of Yen invesment in $ = Investment Value in Yen after investment gain/Ending exchange rate

= 11,272,450/88.65

= $ 127,156.80

Total return on investment in $ = 127156.80 - 125000= $ 2156.80

Total return in % = Total return in $ /Initia investment

=2156.80/125000

= .01725 or 1.725%

jeff jeffy answered 1 year ago

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