Take the interest rate on a 10-year bond from one year previously (go to tradingeconomics.com or search for

‘tradingeconomics bonds’ online and the GBP quote rate for the base you have selected, then take the rate for the present and calculate the return you would have obtained from investing in a 10-year bond in that country (www.

oanda.com/fx-for-business/historical-rates is one of several sites for historical exchange rates).

a Compare the rate with what would have been the yield on a UK 10-year bond.

b What is the bigger source of the return, the change in the exchange rate or the yield on the bond?

c How do you think your findings in a and b would extend to other currencies?