Suppose you are a US investor and notice you can borrow at a low rate of 1% in Japan. The exchange rate S is defined such that $1 converts to ¥ S hence a higher S means a stronger USD/weaker ¥. Suppose you borrow ¥10,000 (ten thousand) initially when the exchange rate is S0 =200, convert it to USD and invest the money in the US earning a higher return R=4%. Affter one year, the yen has appreciated and the exchange rate is now S1=100. How much money did you lose overall in USD? [Answer an integer, without $ sign and without minus sign, e.g. answer 12 if your final wealth is $-12]

Suppose you are a US investor and notice you can borrow at a low rate of 1% in Japan. The exchange rate S is defined such that $1 converts to ¥ S hence a higher S means a stronger USD/weaker ¥. Suppose you borrow ¥10,000 (ten thousand) initially when the exchange rate is S0 =200, convert it to USD and invest the money in the US earning a higher return R=4%. Affter one year, the yen has appreciated and the exchange rate is now S1=100. How much money did you lose overall in USD? [Answer an integer, without $ sign and without minus sign, e.g. answer 12 if your final wealth is $-12]

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 5P: Suppose that the exchange rate is 0.60 dollars per Swiss franc. If the franc appreciates 10% against...

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