Please show your work. This is the second time I am posting this queston since i

Question

Please show your work. This is the second time I am posting this queston since it was done incorrectly, the last time.

3. Megahurtz International Car Rentals has rent-a-car outlets throughout the world. It keeps funds for transaction purposes in many foreign currencies. Assume that in 2015 it held 320,000 reals in Brazil worth 250,000 dollars. It earned 13 percent interest, but the real declined 26 percent against the dollar. a. What is the value of its holdings, based on Canadian dollars, at year end? Value of the holdings b. What is the value of its holdings, based on Canadian dollars, at year end if it earned 10 percent and the real went up by 14 percent against the dollar? Value of the holdings

Explanation / Answer

Answer a: Value of its holdings :

Value increased because of the interest rate earned during the holding period of dollars : $250000 * (1+0.13) = $282500

Decrease in value because of the decline in real = $282500*(1-0.26) = $209050

This is the value of canadian dollar holdings $209050

Answer B: if earned 10 percent and real went up by 14%

increase in value because of the interest earned during the time = $250000* 1.10 = 275000

Increase in value because real went up at the moement $275000 * (1+0.14) = $313500

this is the value in canadian dollars $313500

if we want to calculate the value in brazillian real just multiply with the conversion factor between canadian dollar and brazillian dollar.

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