Suppose you are a U.S. investor who is planning to invest $315,000 in Japan. You do...
Suppose you are a U.S. investor who is planning to invest $315,000 in Japan. You do so at a starting exchange rate of 86.18 ¥/$. Your Japanese investment gains 8.90 percent, and the ending exchange rate is 84.46 ¥/$. What is your total return on this investment?
Homework Answers
| Initial Investment in USD = 315,000 |
| Initial Exchange rate = 86.18 ¥/$. |
| 1$ = 86.18 ¥ |
| $315000 = ¥ 86.18*315,000 = ¥ 27,146,700 |
| Initial Investment in Yen = ¥ 27,146,700 |
| Gain = 8.9% |
| Gain = 8.9% * 27,146,700 = ¥ 2,416,056.30 |
| Final investment in Yen = Initial Investment in Yen + Gain |
| Final investment in Yen = ¥ 27,146,700 + ¥ 2,416,056.30 |
| Final investment in Yen = ¥ 27,146,700 + ¥ 2,416,056.30 = ¥ 29,562,756.30 |
| Final exchange rate = 84.46 ¥/$ |
| I$ = 84.46 ¥ |
| 1 ¥ = 1/84.46 $ |
| Final investment in USD = $ 29,562,756.30 * 1/84.46 = $ 350,020.7945 |
| Return on investment = (Final investment/Initial Investment -1 ) * 100 |
| Return on investment = (350,020.7945/315,000 -1 ) * 100 |
| Return on investment = 11.11771253% |
| Return on investment = 11.12% (approx) |
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