An investor starts with €1 million and converts it to £694,500,which is then invested for one year. In a year the investor has £736,170,which she then converts back to euros at an exchange rate of 0.68 pounds per euro. The annual euro rate of return earned was ________.

Question

Quizplus · Accepted Answer

The investor initially converts €1 million to £694,500. After one year, this amount grows to £736,170. Converting this back to euros at a rate of 0.68 pounds per euro gives €1,082,044.12 (since £736,170 / 0.68 = €1,082,044.12). The return in euros is then calculated as (€1,082,044.12 - €1,000,000) / €1,000,000 = 0.08204412, or 8.26 percent.

An Investor Starts with €1 Million and Converts It to £694,500,which