8. Suppose you are a euro-based investor who just sold Honda Motor Co. Ltd. (Honda) shares from Tokyo Stock Exchange. You had invested 30,000 euros to buy Honda shares for 4250 per share one year ago. You sold the stock for 3650 per share and converted the yen proceeds into euro today. Use the exchange rates in the table below. - Last Year's Market Rates Spot Rate $1 = 100 1 = $1.40 Today's Market Rates Spot Rate $1 = 120 1 = $1.25 12-Month Forward Rate $1 = 110 I = $1.35 12-Month Forward Rate $1 = 130 1 = $1.15 a) (6 points) (i) Compute the rate of return on your investment in euro terms. (ii) Would you agree that you (euro-based investor) benefited from the exchange rate movement? Briefly explain. Solution