One year ago, an American investor bought 1000 shares of London Bridges at a pri

Question

One year ago, an American investor bought 1000 shares of London Bridges at a price of £32 (or 32 UK pounds) per share when the exchange rate was $1.5/1 £ (or $1.50 dollars = 1 pound). The investor also invested 3,000,000 Japanese Yen in a money market fund in Japan last year when the exchange rate was 85 Yen = $ 1 US.

(a) Using current exchange rates, what is today’s value of the investor’s portfolio in U.S. dollars if the UK investment decreased 8% (in local currency) and the Japan investment increased 2% (in local currency)?

(b) What is the overall rate of return on the portfolio over the last year?

Please answer both parts :)

Explanation / Answer

1) UK investment = 32,000 pounds

current value= 92% of 32000 = 31360

at current value its 1 pound= 1.55$

so 31360 pound= 1.55x31360= 48608$

increased japaneses investment= 3060000 Yen

at presesnt exchancge this equals to 30600 $

so total= 79208$

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