You are expecting a payment of 480,000PLN three years from now. The risk-free rate of return is 3 percent in the U.S. and 4 percent in Poland. The inflation rate is 2.5percent in the U.S. and 3 percent in Poland. Currently, you can buy 277PLN for 100USD. How much will the payment three years from now be worth in U.S. dollars?

Question

Quizplus · Accepted Answer

E(S₃) = (277PLN/100USD) F1F1F1S1F1F1F10 [1 + (0.04 - 0.03)]³ = 2.85393377PLN480,000PLN F1F1F1S1F1F1F10 ($1/2.85393377PLN) = $168,189

You Are Expecting a Payment of 480,000PLN Three Years from Now