Question
The exchange rate between GBP and and USD is currently $1.50 per pound, the dollar interest rate is 7%, the pound interest rate is 9%.
The exchange rate between GBP and and USD is currently $1.50 per pound, the dollar interest rate is 7%, the pound interest rate is 9%. You have $100,000 in a one-year account that allows you to choose between either currency. If you expect the GBP/USD exchange rate is $1.40 per pound a year from now on and are indifferent to risk, which currency you should choose?
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Fundamentals of Investments Valuation and Management
Authors: Bradford Jordan, Thomas Miller
7th edition
978-0078096785, 78096782, 978-0077861636, 77861639, 978-0078115660
