Dollars per pound sterling

Asked by maham237 @ in Business viewed by 288 People

Calculate the dollar rate of return on a 10,000 pound sterling deposit in a London bank in a year when the interest rate on pounds is 5 percent and the​ dollar/pound exchange rate moves from ​$1.65 per pound to ​$1.51 per pound.

Answered by maham237 @


Answer:

8.48%

Explanation:

First we calculate the future value of the investment of 10,000 pound invested at an interest rate of 5% for one year.

Future value = 10000(1+0.05)^1

Future Value = 10,500.

Now converting that into dollar:

At $1.65 per pound = $17,325

At $1.51 per pound = $15,855

Hence the dollar has gained its value against the pound sterling by almost 8.5%.

Good luck and cheers.


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