"Suppose that you expect during the next year the dollar will appreciate against the pound from 0.5 pound to the dollar to 0.75 pound to the dollar. How much will you expect to make on an investment of $10,000 in British government securities that will mature in one year and pay interest of 8%?"quiz;et

Complete question:

Suppose that during the next year you expect the dollar will appreciate against the pound from 0.5 pound to the dollar to 0.75 pound to the dollar. How much will you expect to make on an investment of$10,000 in British government securities that will mature in one year and pay interest of 8%?

1. -59.5%

2. 28%

3. -28%

4. 8%

-28%  will expect to make on an investment of$10,000 in British government securities that will mature in one year and pay interest of 8%

Explanation:

If the currency has risen it will be traded for less dollars by the end of the year in Pounds, without taxes.

The exchange rate rose from .5 to .75 which triggered a 33% decline. The fund, however, gained 8%.

The trade resulted in a net loss of 28 percent.

If neither of these entries is negative, net sales would result; forbidden transaction. Any direct or indirect selling was a forbidden activity

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