You are planning to invest $150,000 in Hong Kong. If your Hong Kong investment gains 5.0% while the exchange rate moves from 7.77 Hong Kong dollars (HK$)per U.S. dollar to 7.80 per dollar over the period, what is your total return on this investment?

Question

Quizplus · Accepted Answer

First, we need to convert the investment amount to Hong Kong dollars by multiplying 150,000 by the initial exchange rate:
150,000 * 7.77 = HK$1,165,500

After the investment gains 5%, the amount in Hong Kong dollars will increase by:
HK$1,165,500 * 0.05 = HK$58,275

To convert this amount back to US dollars, we use the new exchange rate of 7.80:
HK$58,275 / 7.80 = US$7,481.73

The total return on the investment is the profit in US dollars divided by the initial investment amount in US dollars:
(US$7,481.73 - US$150,000) / US$150,000 = 0.049 or 4.9% 
Therefore, the correct answer is B.

You Are Planning to Invest $150,000 in Hong Kong