Mutual Fund
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Over the past year, the Dollar has depreciated about 10% against the Euro. A year ago you took out a home equity loan in the U.S. at an interest rate of 8% and you invested the money in a German mutual fund that paid a 5% Euro return.
What net combined return did you earn on all of these transactions over the year?
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A German Mutual Fund generated a 5% return. However, as the dollar depreciated by 10%, the value of this in US Dollars is 10% less.
Value after Depreciation = (1+.1)*(1+.05) = 1.155 or 15.5% of the original investment. ...
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