Currency Exchange & Value Question (with Pics!): Lavender Room: Slowtwitch Forums

Currency Exchange & Value Question (with Pics!)

Aug 30, 17 14:59

Hello - a question for the smarty-pants people.

Someone living in the UK gave someone living in the U.S. $50k in 2014. This money was transferred from a UK bank account to a U.S. bank account. The exchange rate then in 2014 was about .64 GBP per $1 USD.

The person in the US is now going to pay back that $50k in 2017. The exchange rate now is .77 GBP to $1 USD.

This was a no interest loan. How would the value of that $50k have changed in thee years and would the change in the exchange rate be a benefit to the lender?

thx.

Last edited by: sweeneytoad: Aug 30, 17 15:01

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Re: Currency Exchange & Value Question (with Pics!) [sweeneytoad] [ In reply to ]

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DavHamm

Aug 30, 17 15:29

Post #2 of 5 (666 views)

sweeneytoad wrote:

Or some one in UK gave $32K GBP to someone in the US in 2014, and are going to get $38,500 GBP back 3 yrs later.

Just Triing
Triathlete since 9:56:39 AM EST Aug 20, 2006.
Be kind English is my 2nd language. My primary language is Dave it's a unique evolution of English.

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Re: Currency Exchange & Value Question (with Pics!) [sweeneytoad] [ In reply to ]

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racin_rusty

Aug 30, 17 15:34

Post #3 of 5 (661 views)

I must blind, I don't see pic's.

IMO it depends. Did the receiving party receive in GBP and convert? If so they need to convert and repay in GBP IMO. Opposite is true if it were the other way. However, I would suggest that a more fair way in the case of a 0 interest loan would be to insure the lender is rewarded in some way. Especially if this a transaction between friends or family.

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Re: Currency Exchange & Value Question (with Pics!) [DavHamm] [ In reply to ]

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Aug 30, 17 16:31

Post #4 of 5 (632 views)

DavHamm wrote:

sweeneytoad wrote:

Or some one in UK gave $32K GBP to someone in the US in 2014, and are going to get $38,500 GBP back 3 yrs later.

Whether or not this is a benefit to the lender depends on what alternatives the lender had for that 32k GBP back in 2014. If the alternatives were keeping the money in a mattress, or keeping the money in a savings account at 1% interest, then that 20% return looks pretty good.

Of course we don't know the risk profile of the loan that was made, so we still don't know if the lender made a good decision back in 2014 -- even if he/she did have lousy alternatives. With the benefit of hindsight, it does look like it all worked out well.

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