Momura is an investment asset manager from Japan. The fund invested Yen100 mil to buyinternational shares two years ago in 2020. The exchange rate was Yen120/USD. The MSCI WorEquity Index has performed well since then from 4500 to 7000 points. At the same time, theJapanese stock market has increased from 15000 to nearly 30000 points. The current exchange rateis Yen100/USD. The fund exits and sells the shares at 7000 points.

A) Compute the rate of return on the investment in Yen terms. Show the workings.

B) Momura's investors were disappointed with the fund performance in the international
market, as it lags far behind that of the Japanese market. They comment: "You should
focus on identifying profitable domestic investments rather than venturing out to
international markets. Most Japanese firms have international exposure anyway. Your
weak performance relative to Japanese investments reflects your inability to understand
that very basic fact." Evaluate the comment.

Answer rating: 100% (QA)

A Rate of return on investment in Yen terms The initial investment was Yen100 million at an exchange ... View the full answer