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(Solution) - In a certain foreign country in 2005 the local currency

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In a certain foreign country in 2005, the local currency (the 'Real') was pegged to the U.S. dollar at the rate of $1 U.S. = 1 Real. The Real was then devalued over the next five years so that $1 U.S. = 2 Real. A bank in the Northeastern United States bought assets in this country valued at 100 million Real in 2005. Now that it is year 2010, what is the worth of this bank's investment in U.S. dollars? Should the bank sell out of its investment in this foreign country or should it buy more assets?


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This question was answered on: Jul 11, 2017

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