Assume that since the beginning of 2001 Chinas government invested 8 trillion yuan in U.S. IBM stocks (each share purchased for $100) to keep the value of Yuan/$ at a fixed rate of (Yuan8/$). Assume at the end of 2004 China is forced to give up its fixed exchange rate policy for a floating rate policy exchange rate policy for a floating rate policy. Suppose China adopts the floating rate at the end of 2004 where yuan goes float at the rate of (Yuan4/$) and China liquidate all U.S. stock. Assume during 2001-2004 the interest rates for U.S. and China were at 2% and 4% respectively. Assume that the IBM stock price was $150 at the time of liquidation.

Calculate the rate of return earned on this investment in terms of the dollar.

Calculate the rate of return earned on this investment in terms of yuan.