Question

An investor believes that the U.S. dollar will rise in value relative to the Japanese yen. The same investor is considering two investments with identical risk and return characteristics. One stock is trading in yen in Japan and the other stock is a stock trading in dollars in the United States. Should the investor purchase the Japanese​ stock?

Answer 1

Answer:

No. The investor will lose money in the currency exchange if the U.S. dollar gains strength relative to the Japanese yen.

Explanation:

From the question, we are informed about An investor who believes that the U.S. dollar will rise in value relative to the Japanese yen. The same investor is considering two investments with identical risk and return characteristics. One stock is trading in yen in Japan and the other stock is a stock trading in dollars in the United States. In this case , the investor should not purchase the Japanese​ stock this is because he will lose money in the body of currency exchange, especially in a case whereby U.S. dollar gains strength in relative to Japanese yen.