During a year, the price of a British Bond (face value £100) rose from £103 to £105 while paying a coupon of £8. At the same time, the exchange rate moved from $/£ 1.70 to $/£ 1.58. What is the total annual return in % f

Assume the investor had $1,000 He gets $1,000/1.70 = £588.235 He can invest in £588.235/103 = 5.711 securities Coupon Income = 5.711 x £8 = £45.688 Capital gains = 5.711(105 - 103) = £11.422 Total inflow of liquidation = £588.235 + £45.688 + £11.422 = £645.345 Inflow in $ = £645.345 x 1.58 = $1019.645 Return = (($1019.645 - 1000)/1000) * 100 = 19.645/10 = 1.9645%