An international investor who expects that in the future, a British pound (£) will buy $1.60 in U.S. currency instead of its current exchange rate of $1,50 may hope for the following chain of events to occur
- Take $24,000 in U.S. currency convert it to £16,000 in British currency
- Exchange rate for pound (£) changes from $1.50 to $1.60
- Now convert £16,000 back to $25,600-and earn a profit of $1,600
