Question

japan life insurance company invested $10,000,000 in pure-discount u.s. bonds in may 1995 when the exchange rate was 80 yen per dollar. the company liquidated the investment one year later for $10,770,000. the exchange rate turned out to be 110 yen per dollar at the time of liquidation. what rate of return did japan life realize on this investment in yen terms? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places.)

Answer 1

The rate of return that Japan life realize on this investment is 48.087%.

What does the term "rate of returns" mean?

The percentage change in an investment's value is represented by the annual rate of return. For instance, if you estimate a 10% annual rate of return, you're anticipating that your investment's value would rise by 10% annually The result is multiplied by 100 to be reported as a percentage. The IRR evaluates the long-term performance of a project, capital expenditure, or investment.

Given:

To find rate of return in Yen,

Convert the initial and the ending value to Yen.

The initial cost is:

$10,000,000 × 80 = 800,000,000

The ending value in Yen is

10,770,000 × 110 = 1,184,700,000

Thus the rate of return in Yen,

rate of return =( 1,184,700,000 - 800,000,000) / 800,000,000

rate of return = 384700000/ 800,000,000 = 48.087%

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