Suppose you are a U.S. investor who is planning to invest $245,000 in Japan. You
ID: 2384471 • Letter: S
Question
Suppose you are a U.S. investor who is planning to invest $245,000 in Japan. You do so at a starting exchange rate of 85.48 ¥/$. Your Japanese investment gains 8.2 percent, and the ending exchange rate is 89.85 ¥/$. What is your total return on this investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Suppose you are a U.S. investor who is planning to invest $245,000 in Japan. You do so at a starting exchange rate of 85.48 ¥/$. Your Japanese investment gains 8.2 percent, and the ending exchange rate is 89.85 ¥/$. What is your total return on this investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Explanation / Answer
The total return would comprise of investment gains and the return resulting from an increase in exchange rate. The formula that can be used to calculate total return is:
Total Return = Investment Gain + (Closing Exchange Rate - Opening Exchange Rate)/Opening Exchange Rate*100
____________
Solution:
Here, Investment Gain = 8.2%, Closing Exchange Rate = 89.85 and Opening Exchange Rate = 85.48
Using these values in the above formula, we get,
Total Return = 8.2 + (89.85 - 85.48)/85.48*100 = 13.31% (answer)