SUPPOSE YOU START WITH $100 AND BUY STOCK FOR £50 WHEN THE EXCHANGE...

1. Suppose you start with $100 and buy stock for £50 when the exchange rate is £1 = $2. One year later, the stock rises to £60. You are happy with your 20 percent return on the stock, but when you sell the stock and exchange your £60 for dollars, you only get $45 since the pound has fallen to £1 = $0.75. This loss of value is an example of a. Exchange Rate Risk b. Political Risk c. Market imperfections d. Weakness in the dollar