### Expected percent change in value of british pound

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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?

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?

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