Exchange Rate Risk In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $75 million investment in Indonesia when the exchange rate changes from $1 = 1,000 rupiah to $1 = 7,000 rupiah?

Question

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When the exchange rate changes from $1 = 1,000 rupiah to $1 = 7,000 rupiah, the rupiah has devalued by a factor of 7. Therefore, the investment in rupiah is now worth $10,714.29 ($75,000,000 divided by 7,000). This represents a percentage change of -85.71%, meaning the investment has lost 85.71% of its value.

Exchange Rate Risk in the Late 1990s, Many East Asian