$\begin{array}{|l|r|}
\hline& \text { Discrete return (i.e. \% change) } \
\hline \text { Investment value (USD) } & 8 \% \
\hline \text { Exchange rate (AUD/USD) } & 7 \% \
\hline
\end{array}$
-Given the information contained in the table regarding a foreign investment an Australian investor made in the US,what is the discrete Australian dollar (AUD)return over the period?

Question

$\begin{array}{|l|r|} 
\hline& \text { Discrete return (i.e. \% change) } \
\hline \text { Investment value (USD) } & 8 \% \
\hline \text { Exchange rate (AUD/USD) } & 7 \% \
\hline
\end{array}$
-Given the information contained in the table regarding a foreign investment an Australian investor made in the US,what is the discrete Australian dollar (AUD)return over the period?

Quizplus · Accepted Answer

There are two ways to answer this question.The first involves converting the start of period and end of period values into AUD and then calculating the AUD return as you would for any other investment.That is,the start of period value of the investment in AUD is $1000 F1F1F1S1F1F1F10 1.3500 = $1350 and the end of period value is $1200 F1F1F1S1F1F1F10 1.3500 = $1620.The return on this investment is therefore (1620 - 1350)/1350 = 0.200 or 20.0%.Alternatively,the USD return on the investment is (1200 - 1000)/1200 = 0.2000 and the percentage change in the exchange rate is (1.3500 - 1.3500)/1.3500 = 0.000,which using equation 3.1 gives (1.200)(1)- 1 = 0.2000 or 20.0%.

-Given the Information Contained in the Table Regarding a Foreign