$\begin{array}{|l|l|l|}
\hline & \text { Start of period } & \text { End of period } \
\hline \text { Investment value (USD) } & \$ 1000 & \$ 1200 \
\hline \text { Exchange rate (AUD/USD) } & 1.3500 & 1.3500 \
\hline
\end{array}$
-An Australian investor purchases a European-based investment at a price of EUR52.50 when the exchange rate was AUD0.6500/AUD.If the exchange rate when the investment was sold was 0.6400,what must the investor sell the investment for to make a discrete return of 15%?

Question

Quizplus · Accepted Answer

To convert the EUR investment return into AUD,we need to have a quotation for the EUR expressed in AUD (1 + R_FOR)- 1.Therefore,the change in the exchange rate (%F1F1F1S1F1F1F10S)is 0.132 or 13.2%.That is,the investment must earn a EUR return of 13.2% over the period,which implies a selling price of EUR52.50 F1F1F1S1F1F1F10 1.132 = 59.43.

-An Australian Investor Purchases a European-Based Investment at a Price