Question

Suppose that you​ buy, and one year later​ sell, a foreign​ (British) bond under the following​ circumstances: When you buy the bond the exchange rate is ​$2.00 = pound£1. You pay pound£45​ ($90) for the British bond. You sell the bond for pound£50. No interest payment was expected or received. When you sell the​ bond, the exchange rate is ​$1.50 = pound£1. What is your gain or loss in dollars $_______

Answer 1

- $15 loss is the answer

Solution:

Given,

The exchange rate is ​$2.00 = pound £1

The exchange rate is ​$1.50 = pound£1

You pay pound£45​ ($90)

Now.

Buy ( $2.00 x 45 pounds = $90)

Sell ($1.50 x 50 pounds = $75)

=> $75 - $90 = - $15 loss