You are considering a project in Poland, which has an initial cost of 250,000PLN. The project is expected to return a one-time payment of 400,000PLN 5 years from now. The risk-free rate of
Return is 3 percent in Canada and 4 percent in Poland. The inﬂation rate is 2 percent in Canada and
5 percent in Poland. Currently, you can buy 375PLN for $100. How much will the payment 5 years
From now be worth in dollars?

Question

Quizplus · Accepted Answer

The future value of 400,000 PLN in 5 years needs to be converted to dollars using the current exchange rate. 400,000 PLN / 375 PLN per $100 = $106,666.67. Adjusting for the inflation differential (5% in Poland vs. 2% in Canada) over 5 years, the value in dollars is approximately $101,490.

You Are Considering a Project in Poland, Which Has an Initial