Suppose you are a U.S. investor who is planning to invest $985,000 in Mexico. Yo
ID: 2384472 • Letter: S
Question
Suppose you are a U.S. investor who is planning to invest $985,000 in Mexico. Your Mexican investment gains 12.0 percent. If the exchange rate moves from 14.2 pesos per dollar to 14.5 pesos per dollar over the period, 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 $985,000 in Mexico. Your Mexican investment gains 12.0 percent. If the exchange rate moves from 14.2 pesos per dollar to 14.5 pesos per dollar over the period, 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
Initial investment in Mexican currency = $985,000 * 14.2 pesos per $
= 13,987,000 pesos
Investment value in Mexican currency after the period = 13,987,000 pesos * (1 + 12%)
= 15,665,440 pesos
Investment value in US currency after the period = 15,665,440 pesos / 14.5 pesos per $
= $1,080,375
Overall return in US currency = [$1,080,375 / $985,000 - 1] * 100%
= 9.68%