You Consider Investing in Four Very Volatile Emerging Markets A Calculate the Return, in Dollars, on Each Market

question 9

Essay

You consider investing in four very volatile emerging markets. These are small countries just opening up to foreign investment. You spread your money equally across them. After a year, the following observations are made on the performance of each market:
$$\begin{array} { c c c c } \text { Cauntry } & \begin{array} { c } \text { Return in } \\\text { Lactal Currency }\end{array} & \begin{array} { c } \text { Currency } \\\text { Depreciation }\end{array} & \text { Comument } \\\hline \text { A } & 400 \% & 20 \% & \text { High inflation, high } \text { growth } \\\text { B } & 60 \% & 10 \% & \\\text { C } &0 & 40 \% & \text { High inflation, low growth } \\\text { D } & - 100 \% & 80 \% & \text { Foreigners } \text { got exprapriated }\end{array}$$ a. Calculate the return, in dollars, on each market. The currency depreciation is equal to the drop in the dollar value of one unit of local currency. For example, if the peso moves from 1 dollar per peso to 0.8 dollar per peso, the depreciation of the peso is measured as 20%.
b. What is the return on a portfolio equally invested in each market?

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