Assume that an American investor decides to buy one-year Swiss bonds that are denominated in Swiss francs and pay 2 percent annual interest.For this purpose, $10, 000 is exchanged into Swiss francs at an exchange rate of $1 = 2Fr to buy the bonds.How many dollars will the investor have after one year if the exchange rate is then $1 = 1.5Fr?

Question

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The investor initially exchanges $10,000 into 20,000 Swiss francs (since $1 = 2Fr). After one year, the bonds grow by 2% to 20,400 Swiss francs. When converting back to dollars at the new exchange rate of $1 = 1.5Fr, the investor receives 20,400 / 1.5 = $13,600.

Assume That an American Investor Decides to Buy One-Year Swiss