Assume that a bank has assets located in London worth £150 million
January 4th, 2018
Assume that a bank has assets located in London worth £150 million on which it earns an average of 8 percent per year. The bank has £100 million in liabilities on which it pays an average of 6 percent per year. The current spot exchange rate is £1.50/$.If the exchange rate at the end of the year is £2.00/$, will the dollar have appreciated or devalued against the mark?
