Suppose that the exchange rate for U.S. $1 for another currency is such that U.S. $1...

 

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Suppose that the exchange rate for U.S. $1 for another currency is such that U.S. $1 = 3.5 ARS (Argentine pesos). Further suppose that if the exchange rate remains the same, you will receive a 25% return on your investment in ARS currency over the next year's period. As an investor, you are aware of the volatility in Argentina's currency exchange so sudden movements are expected. a. If the exchange rate were to change such that $1 = 50ARS, what return do you expect on the investment? (10 marks) b. If the exchange rate were to change such that $1 = 2ARS, what return do you expect on the investment? (10 marks) Suppose that the exchange rate for U.S. $1 for another currency is such that U.S. $1 = 3.5 ARS (Argentine pesos). Further suppose that if the exchange rate remains the same, you will receive a 25% return on your investment in ARS currency over the next year's period. As an investor, you are aware of the volatility in Argentina's currency exchange so sudden movements are expected. a. If the exchange rate were to change such that $1 = 50ARS, what return do you expect on the investment? (10 marks) b. If the exchange rate were to change such that $1 = 2ARS, what return do you expect on the investment? (10 marks)

Answer rating: 100% (QA)

Investment Return Scenarios in ARS Argentine Pesos Scenario Information Initial exchange rate US 1 35 ARS Investment return in ARS 25 over 1 year a Ex... View the full answer