If you were working for a foreign subsidiary based in Japan and could invest Japanese yen for one year until the yen are needed to support local operations, where would you invest the yen? Explain.

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If you were working for a foreign subsidiary based in Japan and could invest Japanese yen for one year until the yen are needed to support local operations, where would you invest the yen? Explain.

The Bloomberg website (www.bloomberg.com) provides interest rate data for many different foreign currencies over various maturities.

If you were working for a foreign subsidiary based in Japan and could invest Japanese yen for one year until the yen are needed to support local operations, where would you invest the yen? Explain.

Answer & Explanation (1)

Here is a tip:
Returns on investment is directly related to its yield percentage.

Explanation
Country U is leading with the highest rate of yield, which makes it better to invest Country J's yen in Country U's dollars instead of Country J itself. Country U is giving 0.13% rate of yield.

Other countries are giving a lower rate of yield or negative returns.

Verified Answer
If the funds were invested in yen for one year, it would be invested in Country U's dollars. This is because the currency of Country U is giving the highest rate of yield, that is, 0.13%

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