Homework Answers
7. Option A. lower by 50 million pesos.
When you put $100 million to buy Mexican assets when 2 pesos = 1 dollar, you are investing 100million * 2 = 200million pesos.
Now, when the exchange rate is 1.50pesos = 1 dollar, your investment worth is = 100million * 1.50 = 150million pesos.
This would mean your assets are lower by 50 million pesos because now after the exchange rate fell to 1.50pesos for 1 dollar and (200 - 150)million pesos = 50 million pesos.
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