ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Suppose a British investor is expected to receive payment of 150,000 dollars ($) in twelve months from a U.S. bank. The annual interest rate in dollar deposit is 5% and the annual interest rate in pound deposit is 10%. If the present exchange rate is 0.50 pound per dollar deposit and interest parity holds, then.
(a) How many pounds does the British investor expect to receive at the maturity date of his U.S. investment? (Show the computation process).
(b) How many pounds were initially invested? Fully explain all your answers (calculation).
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