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Exchange Rates

edited October 2012 in Off-Topic
This has always been confusing to me.

On November 26, 2011, 1 US Dollar equaled 527 Chilean Pesos. Today, 1 US Dollar equals 473 Chilean Pesos.

Assuming on November 26, 2011 you took $1,000 to Chile and purchased equities and that the underlying investment did not changed in the past year.

If you sold the investment today and converted it back to dollars, how many would you receive?



  • edited October 2012
    If the Chilean Peso investment had 0% return and you sold that and decided to bring the money back in dollars you would lose 10.25% of your original investment in dollar terms.

    Update: @mfs is correct. I made a mistake. You gain 11.42%
  • Reply to @Investor:



  • msf
    edited October 2012
    Let's try that again.

    In Nov 2011, you bought 527,000 pesos. Today, you sell those pesos, and for every 473 pesos, you get $1. We can add that up:
    473 pesos = $1
    + 473 pesos = $1
    + 473 pesos = $1
    526,922 pesos = $1114 dollars, and you've still got 78 pesos in your pocket.

    That is, 527,000 pesos * $1/473 pesos = $(527,000/473) = $1,114. 165. The peso rose in value relative to the dollar (it takes fewer pesos to buy a dollar now than last November), so your holding increased in value along with the peso.
  • Reply to @msf: You are absolutely correct. Thanks again for attention to detail.
  • Reply to @msf: Thanks, I always have trouble with this too. Needed that simple way of looking at it.
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