Suppose you start with $$100$ and buy stock for $50$ when the

exchange rate is $1=$$$2.$ One year later, the stock rises to $60.$

You are happy with your $20$ percent return on the stock, but when

you sell the stock and exchange your $60$ for dollars, you only get

$$45$ since the pound has fallen to $1=$$$0\mathrm{.}75.$ This loss of value is

an example of

market imperfections.

exchange rate risk.

weakness in the dollar.

political risk.