In May 1995, Japan Life Insurance Company invested $10,000,000 in pure-discount U.S. bonds while the exchange rate was 80 yen per dollar. The company liquidated the investment one year afterwards for $10,650,000. The exchange rate turned out 110 yen per dollar at the time of liquidation. Calculate rate of return which Japan Life did realizes on this investment in yen terms.
Japan Life Insurance Company spent ¥800,000,000 to purchase $10,000,000 which was invested in U.S. bonds. The liquidation value of this investment is ¥1,171,500,000, that is acquired from multiplying $10,650,000 by ¥110/$.
The rate of return in terms of yen is following:
[(¥1,171,500,000 - ¥800,000,000)/ ¥800,000,000]x100 = 46.44%.