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.