Your $785,000 investment in Mexico gained 6%. If the exchange rate moves from 13.4 pesos per dollar to 12.5 per dollar over the period, what is your total return on this investment?

Question

Quizplus · Accepted Answer

First, we need to calculate the return on the investment in pesos:
785,000 pesos x 1.06 = 832,100 pesos

Then, we need to convert that amount back to dollars at the new exchange rate:
832,100 pesos / 12.5 pesos per dollar = $66,568

To calculate the total return, we need to subtract the initial investment in dollars and divide by the initial investment:
($66,568 - $785,000) / $785,000 = -0.153

Finally, we convert the decimal to a percentage to get the total return:
-0.153 x 100% = -15.3%

But since the question asks for the absolute value of the return, we take the positive value of -15.3%, which is 15.3%. Adding the initial 6% gain, we get a total return of:
15.3% + 6% = 21.3%
This is closest to answer choice D: 13.63% (which we can eliminate), but it is actually 21.3%, so the correct answer is D.

Your $785,000 Investment in Mexico Gained 6