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7) (: Japanese Yen, : Euro) Given that the spot ( / ) = 100, an investor who has 5,000 expects to go up by 10% against during the next year. If the investor borrows another 5.000, with a borrowing rate of 5%, and invests all of them in now (the investor coverts a total of 10,000 to from the sport rate); 4 4750 - 45000 - = -0.05 a) What will the investor's rate of return be if the does not change at all against by the year's end? (10 Points) Today = $10,000 & 4/4100= 100 One year later 100 % 4/6100 = 4 10,000 pricipal + Interest : 45000 X (1+5)) = 45250 410,000 - 45250 = 4 4150 . Rate of Retum End- Begin Begin 45000 = -5% b) What will the investor's rate of return be if the indeed appreciates by 10% against by the year's end? (20 Points) Appreciates 4 10% 41100 ( 1+10%) = 41 110. Today= $10,000 & 4/4100 = 100 One year later: 160 x 41 110 - 411000 Pricipal + Interest 45000X (1+5%) = 45250 4 11,000 - 45250 = 45750 Rate of Return= 45756-45000 = 0.15 45000