Deck 20: International Corporate Finance

Question 1

A foreign bond issued in the United States and denominated in U.S.dollars is called a(n)

A)American Depository Receipt.
B)gilt.
C)Eurobond.
D)Yankee bond.
E)swap bond.

Answer 1

Yankee bond.

Question 2

Suppose the spot exchange rate between U.S.dollars and the U.K.pound is $2/£ while the forward rate is $1.90/£.Which one of the following is true?

A)The value of the U.K.pound is expected to remain constant.
B)The U.K.pound is selling at a premium.
C)The U.K.pound is selling at a discount.
D)The U.K.pound is expected to appreciate.
E)The U.S.dollar is expected to depreciate.

Answer 2

The U.K.pound is selling at a discount.

Question 3

International bonds issued in a single country and denominated in that country's currency are called

A)Treasury bonds.
B)Eurobonds.
C)foreign bonds.
D)Brady bonds.
E)gilts.

Answer 3

foreign bonds.

Question 4

Triangle arbitrage:

A)no longer exists as all currencies have obtained equilibrium on an ongoing basis.
B)prevents exchange markets from obtaining equilibrium.
C)opportunities can exist in either the spot or the forward market.
D)requires three currencies that are correctly priced plus one incorrectly priced currency.
E)is rarely profitable.

Question 5

An agreement to trade currencies based on the exchange rate today for settlement within two business days is called a(n)________ trade.

A)spot
B)forward
C)futures
D)option
E)swap

Question 6

Which one of these must be true if absolute purchasing power parity is to absolutely hold?

A)Customer preferences for an item must be identical across markets.
B)There must be greater demand for the item in one area as compared to another area.
C)Forward rates must equal spot rates.
D)The goods traded must have a feature unique to each individual market.
E)Transaction costs must be imposed on both ends of a trade.

Question 7

Which two countries use the krone as their home currency?

A)Singapore and India
B)Switzerland and Sweden
C)Denmark and Norway
D)South Africa and Saudi Arabia
E)Kuwait and Iran

Question 8

A direct quote is

A)is equal to (1 - Indirect quote).
B)also called the European quote.
C)is shown as the Currency per USD in the Wall Street Journal.
D)the number of U.S.dollars required to purchase one unit of a foreign currency.
E)generally set at the beginning of each calendar day and held constant during that day.

Question 9

Which one of these is a U.S.company-sponsored security that trades on an exchange and has an underlying value based on foreign securities?

A)Yankee bond
B)Foreign bond
C)American Depository Receipt
D)Gilt
E)Eurobond

Question 10

An agreement made today that sets both the exchange rate and the quantity of currency that will be traded at some point in the future is called a ________ trade.

A)spot
B)floating
C)swap
D)triangle
E)forward

Question 11

Assume a currency is less expensive in the forward market than in the spot market relative to the U.S.dollar.When this occurs,the currency is said to be selling at

A)the spot price.
B)an arbitrage price.
C)a premium relative to the dollar.
D)its true relative value.
E)a discount relative to the dollar.

Question 12

Assume the euro is selling in the spot market for $1.10.Simultaneously,in the 3-month forward market the euro is selling for $1.12.Which one of the following statements correctly describes this situation? I.The euro is selling at a premium relative to the dollar.
II)The dollar is selling at a premium relative to the euro.
III)The dollar is selling at a discount relative to the euro.
IV)The euro is selling at a discount relative to the dollar.

A)I and II only
B)I and III only
C)II and IV only
D)III and IV only
E)I and IV only

Question 13

Up-Town Markets exchanged their floating-rate payments with Downtown Markets' fixed-rate payments.This exchange is referred to as a

A)gilt exchange.
B)forward rate.
C)cross-rate.
D)spot exchange.
E)swap.

Question 14

The cross rate is the

A)exchange rate between the U.S.dollar and another currency.
B)implicit exchange rate between two currencies when both are quoted in a third currency.
C)rate converting the direct rate into the indirect rate.
D)difference between the official exchange rate and the rate that can be received locally.
E)difference between the spot rate and the forward rate.

Question 15

Which one of these expresses the concept that a commodity will cost the same regardless of where the commodity is located or the currency used to pay for it?

A)Interest rate parity
B)Uncovered interest rate parity
C)Absolute purchasing power parity
D)International Fisher effect
E)Relative purchasing power parity

Question 16

Which one of these best expresses the value of one currency in terms of a second currency?

A)LIBOR
B)Exchange rate
C)Depository Rate
D)Arbitrage rate
E)Real rate

Question 17

Which one of these combinations of country,currency,and currency symbol is incorrect?

A)Mexico,peso,Ps
B)Japan,yen,¥
C)United Kingdom,pound,£
D)Saudi Arabia,riyal,Ry
E)EMU,euro,€

Question 18

What does LIBOR stand for?

A)London Interest Bearing Orderly Rate
B)Lisbon Interest Bearing Organization Rate
C)Liberal Interest Bearing Offer Rate
D)Lisbon International Bank Offering Rate
E)London Interbank Offered Rate

Question 19

A bond issued in multiple countries but generally denominated in the single home currency of the issuer is called a

A)Treasury bond.
B)Eurobond.
C)Bulldog bond.
D)Samurai bond.
E)Yankee bond.

Question 20

Which one of these statements related to the foreign exchange market is correct?

A)Currency trading floors are operated by the central bank of each country.
B)The primary currency trading floor is located in London.
C)The foreign exchange market is second in size as a financial market only to the New York Stock Exchange.
D)Currency trading floors are located in all the major financial centers of the world and operated by commercial banks.
E)SWIFT is a means of handling foreign currency transactions that is sponsored by a Belgian cooperative.

Question 21

Assume the international Fisher effect exists and the inflation rate in the U.S.exceeds the inflation rate in Canada.What can we state for certain given this information?

A)Nominal rates in the United States exceed nominal rates in Canada.
B)Real rates in Canada exceed real rates in the United States.
C)The inflation rate in Canada will increase so it equals the U.S.inflation rate.
D)Nominal rates in Canada exceed nominal rates in the United States.
E)Nominal rates will be the same in both countries.

Question 22

Assume the spot exchange rate is 6.22 Chinese yuan per U.S.dollar.If the inflation rate in China is expected to be double that in the U.S.for the next 2 years,then the

A)exchange rate will be unaffected as inflation is irrelevant to exchange rates.
B)dollar will weaken against the yuan.
C)yuan will appreciate relative to all other currencies.
D)dollar will remain constant against the yuan.
E)dollar will strengthen against the yuan.

Question 23

Which one of these presents the idea that forward rates are equal to expected future spot rates?

A)International Fisher effect
B)Interest rate parity
C)Uncovered interest rate parity
D)Triangle arbitrage
E)Unbiased forward rate condition

Question 24

For accounting purposes,the translation gains and losses that affect a firm's balance sheet are

A)recorded as an intangible asset.
B)treated as either current income or a current expense as they are incurred.
C)treated as an unsecured debt of the firm.
D)recorded as stockholders' equity.
E)recorded as a deferred liability.

Question 25

Relative purchasing power parity states that exchange rates vary in response to

A)differences in interest rates between countries.
B)changes in the trade barriers between countries.
C)changes in the tax rates imposed by a country.
D)differences in the inflation rates between countries.
E)arbitrage trades involving the exchanged currencies.

Question 26

Which one of the following conditions does not exist if absolute purchasing power parity exists?

A)Goods are identical.
B)Trade barriers are nonexistent.
C)Transaction costs are equal to zero.
D)Goods have equal economic values.
E)Goods differ based on geographic location.

Question 27

Interest rate parity

A)eliminates exchange rate fluctuations.
B)exists when spot rates are equal for multiple countries.
C)exists when the spot rate is equal to the forward rate.
D)means that the nominal risk-free rate of return must be the same across countries.
E)eliminates covered interest arbitrage opportunities.

Question 28

Which one of these statements is correct?

A)Relative purchasing power parity says that the expected spot rate 1 year from now is equal to the current spot rate multiplied by (1 + U.S.inflation rate - Foreign inflation rate).
B)The interest rate parity formula is based on real rates of interest.
C)An indirect quote is the number of dollars required to purchase one unit of a foreign currency.
D)Uncovered interest parity is a combination of the unbiased forward rate and interest rate parity.
E)If the euro per dollar is more expensive in the forward market than in the spot market,the euro is selling at a discount.

Question 29

The forward rate market is dependent upon

A)current forward rates exceeding current spot rates.
B)current spot rates exceeding current forward rates over time.
C)current spot rates equalling current forward rates on average over time.
D)current spot rates equalling the actual future spot rates on average over time.
E)forward rates equalling the actual future spot rates on average over time.

Question 30

The changes in the relative economic conditions between countries are referred to as the

A)international Fisher effect.
B)international exchange rate effect.
C)long-run exposure to exchange rate risk.
D)translation exposure to exchange rate risk.
E)the interest rate parity risk.

Question 31

The theory that real interest rates are equal across countries is called

A)purchasing power parity.
B)the international Fisher effect.
C)the unbiased forward rates condition.
D)uncovered interest parity.
E)interest rate parity.

Question 32

According to the unbiased forward rate theory,the current 90-day forward rate should fairly accurately predict the

A)interest rate differential between two countries 90 days from now.
B)difference in the inflation rate between two countries 90 days from now.
C)forward rate 90 days from now.
D)real rate 90 days from now.
E)spot rate 90 days from now.

Question 33

Assume you borrow $5,000 today,exchange the $5,000 into yen,and then invest the yen for 30 days,at which time you need to pay an invoice to a Japanese supplier.In essence,you have

A)eliminated your long-term exposure to exchange rate risk.
B)achieved an equilibrium known as the international Fisher effect.
C)offset any potential translation exposure to exchange rate risk.
D)entered into a forward contract.
E)generated a profit from triangle arbitrage.

Question 34

The foreign currency approach to capital budgeting analysis

A)is computationally harder to use than the home currency approach.
B)produces different results than the home currency approach.
C)computes the NPV of a project in both the foreign and the domestic currency.
D)relies on the international Fisher effect for the exchange rate.
E)relies on the uncovered interest rate parity to project multiple exchange rates.

Question 35

Which one of the following statements is correct?

A)A firm's long-run exchange rate risk can be reduced by borrowing money in the foreign country where it has operations.
B)FASB requires that all translation gains and losses be recorded annually on the firm's income statement.
C)Unexpected changes in economic conditions are classified as short-run exposure to exchange rate risk.
D)Foreign assets are recorded on the parent firm's balance sheet based on the exchange rate at the time each asset is acquired.
E)The usage of forward rates primarily addresses the long-run exposure to exchange rate risk.

Question 36

Which of the following are means of repatriating funds from a foreign operation?

A)Nationalization,confiscation,and exploitation
B)Blocked funds,home office fees,and dividend payments
C)Interest payments on foreign debt,dividend payments,and management fees
D)Royalties,management fees,and dividend payments
E)Wages to foreign employees,interest payments on foreign debt,and sales fees to foreign agents

Question 37

The international Fisher effect may not hold if

A)risk tolerance levels vary among countries.
B)interest rates vary among countries.
C)currencies can move freely among countries.
D)nominal interest rates vary among countries.
E)inflation rates vary among countries.

Question 38

The home currency approach

A)discounts all of a project's foreign cash flows using the current spot rate.
B)employs uncovered interest parity to project future exchange rates.
C)computes the net present value (NPV)of a project in the foreign currency and then converts that NPV into U.S.dollars.
D)utilizes the international Fisher effect to compute the NPV of foreign cash flows in the foreign currency.
E)utilizes the international Fisher effect to compute the relevant exchange rates determine the NPV of foreign cash flows in U.S.dollars.

Question 39

The home currency approach

A)requires an applicable exchange rate for every time period for which there is a cash flow.
B)stresses the use of the real rate of return to compute the net present value (NPV)of a project.
C)uses the current risk-free nominal rate to discount all of the cash flows related to a project.
D)generally produces more reliable results than those found using the foreign currency approach.
E)provides a net project value in both the home and the foreign currency.

Question 40

Which one of these is a suggested means of reducing long-run exposure to exchange rate risk?

A)Compiling financial statements only in foreign currency terms
B)Using foreign resources to produce products sold in that foreign region
C)Borrowing domestic currency,exchanging it for foreign currency,and investing it in foreign investments
D)Ensuring any foreign operation requires significant parent company involvement
E)Using current spot rates to fund long-term assets

Question 41

Assume $1 can buy you either ¥112 or £.78.If a TV in London costs £649,what will that identical TV cost in Tokyo if absolute purchasing power parity exists?

A)¥35,255.45
B)¥32,967.00
C)¥56,696.64
D)¥98,008.18
E)¥93,189.74

Question 42

Assume that ¥118.62 equal $1.Also assume that 7.4518Skr equal $1.How many Japanese yen can you acquire in exchange for 2,500 Swedish krona?

A)¥157.05
B)¥39,795.75
C)¥618,309.90
D)¥1,054,901.88
E)¥2,209,831.29

Question 43

Assume the direct quote for the Australian dollar is 0.8643 while it is 0.7627 for New Zealand dollar.What is the cross-rate between the Australian dollar and the New Zealand dollar?

A)A$.8709 = NZ$1
B)A$.8824 = NZ$1
C)A$1.0362 = NZ$1
D)A$1.1254 = NZ$1
E)A$1.1332 = NZ$1

Question 44

You want to import $327,000 of merchandise from New Zealand.How many New Zealand dollars will you need to pay for this purchase if the indirect quote is 1.1136?

A)NZ$364,147.20
B)NZ$308,000.00
C)NZ$330,018.02
D)NZ$299,607.50
E)NZ$293,642.24

Question 45

You just returned from some extensive traveling.You started your trip with $25,000 in your pocket.You spent €7,800 traveling throughout the European Union,5,500NKr in Norway,and £9,100 in the United Kingdom.The exchange rates were $1 = €.8031,1NKr = $.1422,and £1 = $1.5649.How many dollars did you have left by the time you returned to the United States?

A)$9,404.58
B)$7,211.38
C)$5,304.49
D)$264.95
E)$3.87

Question 46

A fancy new coat costs SKr989.90.Assume you can exchange SKr1 for $.1402 and €1 for $1.1806.How much will the identical coat cost in euros if absolute purchasing power parity exists?

A)€117.55
B)€144.88
C)€163.85
D)€211.99
E)€133.33

Question 47

Assume you have £100 and can exchange Can$180 for £100.Also assume you can exchange $1 for Can$1.1417 and £1 for $1.5649.How much arbitrage profit in pounds can you earn? Ignore transaction costs.

A)£)75
B)£ 1.09
C)£ 2.02
D)£1.96
E)£)83

Question 48

Assume $1 will buy Can$1.1417 while $1.2452 will buy €1.What is the Canadian dollar/euro exchange rate?

A)Can$.9169 = €1
B)Can$1.0907 = €1
C)Can$1.2619 = €1
D)Can$1.4216 = €1
E)Can$1.1358 = €1

Question 49

How many euros can you get for $864 if the direct quote is 1.2452?

A)€728.72
B)€693.86
C)€847.06
D)€1,092.96
E)€1,075.85

Question 50

How many Singapore dollars can you get for $3,600 if the indirect quote is 1.3043?

A)S$3,661.20
B)S$3,911.15
C)S$4,695.48
D)S$2,760.10
E)S$2,922.01

Question 51

Assume the inflation rate in the United States is 2.2 percent.The spot rate for a foreign currency is 0.947 while the 1-year forward rate is 0.951.What is the approximate rate of inflation in the foreign country?

A)2)62%
B)2)37%
C)1)49%
D)1)63%
E)1)78%

Question 52

Political risk

A)can be greatly reduced by minimizing parent company involvement.
B)varies by industry as well as by country.
C)is solely dependent upon the country in which operations are located.
D)is only faced by firms that have international operations.
E)applies only to those risks associated with a firm's domestic laws and regulations.

Question 53

A coffee mug that suits your style costs $12.98 in the United States.If absolute purchasing power parity exists,what will the same mug cost in Canada if the direct quote is 0.9894?

A)Can$12.84
B)Can$12.99
C)Can$13.08
D)Can$13.12
E)Can$12.92

Question 54

Assume the direct quote for the Swedish krona is 0.1360 while it is 1.0462 for the Swiss franc.What is the cross-rate between the Swedish krona and the Swiss franc?

A)SKr7.6926 = Fr$1
B)SKr7.2093 = Fr $1
C)SKr1.7028 = Fr $1
D)SKr.1300= Fr $1
E)SKr.1387 = Fr $1

Question 55

Assume you can exchange Can$179 for £100.Also assume you can exchange Can$1.1238 for $1 and $1.6024 for £1.How much profit can you earn in U.S.dollars if you start out with $500? Ignore transaction costs.

A)$3.01
B)$2.61
C)$3.57
D)$3.64
E)$2.90

Question 56

A sweater you desire costs Can$68.What will the same sweater cost in the United States if the indirect quote is 1.1417 and purchasing power parity exists?

A)$59.56
B)$64.09
C)$68.78
D)$77.63
E)$76.27

Question 57

A gift you want to buy costs $119 in Canada.Assume purchasing power parity exists and you can exchange $1 for Can$1.14 or you can exchange ¥119.2 for $1.How much will the same gift cost in Japan?

A)¥11,668
B)¥12,443
C)¥13,603
D)¥15,843
E)¥16,171

Question 58

You are planning a return trip to Australia.Your hotel will now cost you $236 per night for 5 nights.You expect to spend $3,800 for food and expenses.How much will this trip cost you in Australian dollars if the indirect quote is 1.0829?

A)A$4,598.76
B)A$4,802.48
C)A$5,094.18
D)A$4,964.92
E)A$5,392.84

Question 59

You are planning a trip to Australia.The hotel will cost you A$182 per night for 7 nights.You expect to spend another A$4,100 for meals,tours,and other expenses.How much will this trip cost you in U.S.dollars if the direct quote is 0.8507?

A)$6,317.15
B)$5,961.85
C)$5,532.61
D)$4,668.14
E)$4,571.66

Question 60

You want to import $62,000 worth of rugs from India.How many rupees will you need to pay for this purchase if one rupee is worth $.01606?

A)3,860,523RS
B)2,803,006RS
C)821,048RS
D)996RS
E)909RS

Question 61

Suppose the spot rate on the Canadian dollar is Can$1.023.The risk-free nominal rate in the United States is 2.6 percent while it is 3.25 percent in Canada.Which one of the following 1-year forward rates best establishes the approximate interest rate parity condition?

A)Can$1.0296
B)Can$1.0164
C)Can$1.0552
D)Can$1.0867
E)Can$1.0923

Question 62

You are expecting a payment of Can$150,000 four years from now.The risk-free rate of return is 3.9 percent in the United States and 4.6 percent in Canada.The inflation rate is 3 percent in the United States and 4.2 percent in Canada.Assume the current exchange rate is Can$1 = $.87.How much will the payment four years from now be worth in U.S.dollars?

A)$138,887
B)$126,909
C)$99,300
D)$166,184
E)$177,285

Question 63

You want to invest in a riskless project in Sweden that has an initial cost of SKr428,000 and is expected to produce cash inflows of SKr231,000 a year for 2 years.The project will be worthless after 2 years.The expected inflation rate in Sweden is 1.7 percent while it is 2.6 percent in the United States.A risk-free security is paying 3.8 percent in the United States.Assume the current spot rate is $1 = SKr7.51.What is the net present value of this project in U.S dollars using the foreign currency approach?

A)$31,811.70
B)$3,799.21
C)$1,951.11
D)$93,684.44
E)$110,043.00

Question 64

You want to invest in a project in Canada.The project has an initial cost of Can$318,000 and is expected to produce cash inflows of C$126,000 a year for 3 years.The project will be worthless after 3 years.The expected inflation rate in Canada is 3.2 percent.The applicable interest rate in Canada is 12.7 percent.Assume the current spot rate is Can$1 = $1.12.What is the net present value of this project in U.S.dollars using the foreign currency approach?

A)$8,407
B)$11,714
C)−$21,249
D)−$23,708
E)$703

Question 65

The expected inflation rate in Finland is 3.67 percent while it is 2.45 percent in the United States.A risk-free asset in the United States is yielding 3.21 percent.What real rate of return should you expect on a risk-free Finnish security?

A)2)91%
B)4)15%
C)6)20%
D)4)43%
E)3)15%

Question 66

Assume today you can exchange $1 for €.8026,while 1 month ago €1 was worth $1.2272.Assume you converted €300 into dollars last month and then converted your dollars back to euros this week.What is your net profit or loss in euros?

A)€3.82
B)−€4.51
C)−€3.78
D)€3.49
E)−€4.91

Question 67

Assume the current spot rate is Can$.9892 and the 1-year forward rate is Can$.9901.The nominal risk-free rate in Canada is 3.8 percent while it is 3.9 percent in the U.S.If you use covered interest arbitrage,how much extra profit can you earn over that which you would earn if you invested $100 in the U.S.for one year?

A)$)16
B)−$.02
C)$)23
D)−$.19
E)$)04

Question 68

Assume the spot exchange rate is £.7024.The expected inflation rate in the United Kingdom is 1.8 percent and in the United States it is 2.4 percent.What is the expected exchange rate 3 years from now if relative purchasing power parity exists?

A)£)6871
B)£)6898
C)£)6962
D)£)7066
E)£)7151

Question 69

Assume the current spot rate for the Norwegian krone is $1 = NKr7.0305.The expected inflation rate in Norway is 2.6 percent,and in the United States its 1.3 percent.A risk-free asset in the U.S.is yielding 2.2 percent.What risk-free rate of return should you expect on a Norwegian security?

A)2)8%
B)3)3%
C)3)5%
D)1)7%
E)1)9%

Question 70

You are expecting a payment of €630,000 three years from now.The risk-free rate of return is 3.4 percent in the United States and 2.9 percent in Euroland.The inflation rate is 2.5 percent in the United States and 2.1 percent in Euroland.Assume you can currently buy €82 for $100.How much will the payment 3 years from now be worth in U.S.dollars?

A)$808,288
B)$779,933
C)$819,949
D)$671,321
E)$684,169

Question 71

Assume the spot exchange rate is A$.8629.The expected inflation rate is 2.8 percent in Australia and 3.4 percent in the United States.What is the expected exchange rate one year from now if relative purchasing power parity exists?

A)A$.8681
B)A$.8618
C)A$.8523
D)A$.8577
E)A$.8669

Question 72

Assume the inflation rate in the United States is 2.8 percent.The spot rate for a foreign currency is 1.6349 while the 3-year forward rate is 1.7084.What is the approximate rate of inflation in the foreign country?

A)4)37%
B)2)02%
C)2)42%
D)2)41%
E)4)28%

Question 73

Assume a risk-free asset in the United States is currently yielding 2.14 percent while a Canadian risk-free asset is yielding 2.57 percent.The current spot rate is Can$.9894.What is the approximate 3-year forward rate if interest rate parity holds?

A)Can$1.0034
B)Can$1.0027
C)Can$1.0022
D)Can$.9973
E)Can$.9978

Question 74

Assume the spot rate for the British pound is currently £.1.5604 while the 1-year forward rate is £1.5587.A risk-free asset in the United States is currently earning 2.6 percent.If interest rate parity holds,approximately what rate can you earn on a 1-year risk-free British security?

A)2)28%
B)2)23%
C)2)46%
D)2)49%
E)2)37%

Question 75

Assume the spot rate for the Japanese yen currently is ¥111.04 per $1.The 1-year forward rate is ¥111.62 per $1.Also assume a risk-free asset in Japan is currently earning 3.4 percent.If interest rate parity holds,approximately what rate can you earn on a 1-year risk-free U.S.security?

A)4)15%
B)3)08%
C)2)86%
D)2)46%
E)3)94%

Question 76

You are considering a project in India which has an initial cost of 250,000RS.The project is expected to return a one-time payment of 425,000RS 5 years from now.The risk-free rate of return is 2.7 percent in the United States and 4.3 percent in India.The inflation rate is 2.2 percent in the United States and 5.3 percent in India.Currently,you can buy 6,300RS for $100.How much will the payment 5 years from now be worth in U.S.dollars?

A)$6,231
B)$7,060
C)$7,201
D)$7,313
E)$6,515

Question 77

Assume the expected inflation rate in the United States its 2.8 percent while a risk-free asset in the United States is yielding 3.5 percent.A similar asset in Norway earns a rate of 4.8 percent.What is the inflation rate in Norway if the international Fisher effect applies?

A)3)2%
B)3)4%
C)4)3%
D)4)6%
E)4)1%

Question 78

Assume the current spot rate is Can$1.0267 and the 1-year forward rate is C$1.0259.The nominal risk-free rate in Canada is 2.5 percent while it is 2.1 percent in the United States.If you use covered interest arbitrage,how much extra profit can you earn over that which you would earn if you invested $1,000 in the United States for 1 year?

A)$)21
B)$4.22
C)$4.80
D)$)24
E)$0

Question 79

Assume today you can exchange $1 for £.7998,while last week £1 was worth $1.2506.Also assume you converted £500 into dollars last week and then converted your dollars back to pounds this week.What is your net profit or loss in pounds?

A)£)1708
B)£)1149
C)£)3018
D)£)3302
E)£)2108