Suppose that the exchange rate for one U.S. dollar for another currency, say the euroyen (EY), is $1 US = 2EY. And suppose that if the exchange rate remains the same, you will get a 20% return on your investment in the EY’s currency over a one-year period.

a. If the exchange rate were to change such that $1 = 3 EY, what return do you expect on your investment?

b. If the exchange rate were to change such that $1 = 1.5 EY, what return do you expect on your investment?