You are expecting a payment of 500,000PLN 3 years from now. The risk-free rate of return is 4 % in Canada and 2 % in Poland. The inflation rate is 4 % in Canada and 1 % in Poland. Currently, you can buy 380PLN for $100. How much will the payment 3 years from now be worth in dollars?

Question

Quizplus · Accepted Answer

To find the future value in dollars, first calculate the future value of PLN using the Polish risk-free rate: 500,000 PLN * (1 + 0.02)^3. Then convert to dollars using the current exchange rate: 380 PLN = $100, so 1 PLN = $100/380. Finally, divide the future PLN value by the exchange rate to get the dollar value.

You Are Expecting a Payment of 500,000PLN 3 Years from Now