Political risk is the effect of change in political policies on investment. It is upon the government how much they want to return to the investor, they may even stop him from withdrawing his capital.
Iquisha further commented below as to how helpful Susan’s post was as she thought the answer would be none of the above and the investors received the correct amount of return due to exchange rate. Iquisha’s comment is welcomed and we hope all her ambiguity is cleared through the answer. Another student Marquisha also commented to Susan’s answer in a positive manner and also stated about political risk from her book. Marquisha’s effort is highly appreciated.
If US dollar depreciates, it implies that more dollars are required to purchase foreign goods, which in turn means that foreign goods become expensive for Americans. However, for foreigners, the implication of a depreciation in the US dollar is favorable. Due to decline in US dollar’s value against foreign currencies, the holders of the respective foreign currencies will find US goods cheaper, as they have to spend less dollars (Byrd, Hickman and