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Calculate the investor’s return in both dollar and pound what if the exchange rate is $2.00, and $2.20?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 41QA

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Question

An investment in risk-free British government securities paying 10% annual interest in British pounds is made by an American investor who starts with $ 20 000. The current exchange rate is $2 per pound. At the end of the year the pound depreciates against the dollar. Calculate the investor’s return in both dollar and pound what if the exchange rate is $2.00, and $2.20?

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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