I have a funny question but it confuses me totally!
Say you buy a stock for $10 and it went up to $12 that means you gained 20%.
(12-10)/10 =.2
why not (12-10)/12=.1666?
What does each one mean and which is more accurate? I am asking because I got this wrong…
The exchange rate for Australian dollars per British pound (AUD/GBP) was 1.4800 five years ago and is 1.6300 today. The percent change in the Australian dollar relative to the British pound is closest to:
A) appreciation of 10.1%. B) depreciation of 9.2%. C) depreciation of 10.1%.
its the idea that when you are long one currency by definition you are short another… if you hold GBP over the period it will appreciate 10.1% 1.63/1.48… so in 5 years you go to exchange it into AUD you will have 10.1% more AUD. the person that held AUD will be getting 9.2% less GBP.
trade made @p0 100K GBP x 1.48 = AUD148,000
the person HOLDING AUD for 5 years 148,000AUD / 1.63 = 90,797GBP @p5
my return 90,797/100,000 = -9.2% LESS GBP - AUD depreciated RELATIVE TO GBP [B]