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explain the risk and return implications of an American company decision to invest 65 million dollars...

explain the risk and return implications of an American company decision to invest 65 million dollars in Japan for 6 months at a Higher interest ?

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For any investment decision, the investor must understand and consider risk and return of the investment. There is direct relationship between risk and return. When the risk of the investment increases the return of the investment is also increases. And when risk of the investment decreases the return of the investment also decrease.

A US investor wants to make investment in Japan at 6% interest rate for 6 month.Interest rate in US is less than 6%. Risk associated with this investment is exchange rate risk that is If US dollar apprecite after 6month then the dollar value of return after 6 month wil be lower than value of investment now.

Again if Japanese yen appreciate after 6 month then return will be higher than 6%. also investor earn higher return at 6% rate since,interest rate in USA is lower.

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