1. Assume that U.S. and British investors require a real return of 1 %. The nominal U.S. interest rate is 12.7 %, and the nominal British interest rate is 8.8 %. The current spot exchange rate is 1.39 USD/GBP.
If the IFE holds, what is the expected percent change in the value of the British pound relative to the dollar, over the course of the year?
Enter answer in percents.
2. Suppose that 6 years ago, you purchased 220 shares of stock in a corporation. Between then and now, the stock had a 2:1 split and a 5:1 split. Today, each share sells for $12. If selling all of your shares today would give your investment an annual rate of return of 10%, what was the price per share when you made the purchase 6 years ago?