Suppose that you buy and one year later sell a foreign Briti

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 $1.75 = £1. You pay £45($78.75) for the British bond.

You sell the bond for £50.. No interest payment was expected or received. When you sell the bond, the exchange rate is $1.95 = £1. What is your gain or loss in dollars? $__?__ (Round your response to the nearest penny and include a minus sign for a loss.)

Solution

The amount paid to purchase the bond = £45

The amount received after selling the bond = £50

So,

The gain (in £) = £5

The gain (in dollars) = 5*1.95 = $9.75