Hey there! Sign in to join this conversationNew here? Join for free
    • Thread Starter
    Offline

    0
    ReputationRep:
    I was thinking about this today. I have no experience of finance, as you'll probably guess.

    If your currency is extremely close to another currency, say for the sake of argument they are equal in value, and you know nothing about economics or where each country's currency is going, should you not put all your money into the other currency, put it in a high interest account in the other country, then transfer back when they change values?

    My argument: say your currency is equal to another to begin with, and you don't know anything else. Then for you there is equal chance of the exchange rate going to 1.1 from your currency to the other as there is of the exchange rate going to 1.1 from the other currency to your currency.

    Assume equal interest rate bank accounts in the other country, so that at the point of exchange back, you have the same "amount" of money in terms of the figure, ignoring the currency, as you would've in the British currency.

    In the first case, you transfer your money back at a rate of 1/1.1 = 10/11, and lose 1/11 of the money you originally held in your currency.

    In the second, you gain 1/10 of the money you originally held in your currency.

    So the expected gain would be 1/10-1/11 = (11-10)/110 = 1/110 of your original money.

    Is this expected gain simply too tiny to bother with? Is my example too particular? if it works, can it be extended to general currencies?
 
 
 
  • See more of what you like on The Student Room

    You can personalise what you see on TSR. Tell us a little about yourself to get started.

  • Poll
    Are unpaid trial work shifts fair?
    Useful resources
    AtCTs

    Ask the Community Team

    Got a question about the site content or our moderation? Ask here.

    Welcome Lounge

    Welcome Lounge

    We're a friendly bunch. Post here if you're new to TSR.

    Groups associated with this forum:

    View associated groups
  • See more of what you like on The Student Room

    You can personalise what you see on TSR. Tell us a little about yourself to get started.

  • The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

    Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

    Quick reply
    Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.