You are expecting a payment of C$100,000 two years from now. The risk-free rate of return is 3.8 percent in the U.S. and 4.1 percent in Canada. The inflation rate is 2 percent in the U.S. and 3 percent in Canada. Suppose the current exchange rate is C$1 = $.9132. How much will the payment two years from now be worth in U.S. dollars?

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To find the value of the payment in U.S. dollars two years from now, we first need to discount the future payment of C$100,000 back to its present value in Canadian dollars using the Canadian risk-free rate of 4.1%. Then, we convert that present value to U.S. dollars using the current exchange rate.The present value (PV) in Canadian dollars is calculated as:$$ PV = \frac{FV}{(1 + r)^n} $$$$ PV = \frac{100,000}{(1 + 0.041)^2} $$$$ PV = \frac{100,000}{1.0841} $$$$ PV ≈ C$92,233.29 $$Then, convert this amount to U.S. dollars using the exchange rate of C$1 = $.9132:$$ U.S. dollars = C$92,233.29 \times .9132 $$$$ U.S. dollars ≈ $84,204.66 $$However, none of the provided options match this calculation directly, indicating a possible misunderstanding in the calculation process or an error in the question's setup. Given the options, the closest and correct approach involves recognizing the need to adjust for both the risk-free rate and the exchange rate, but the exact calculation provided does not align with the options, suggesting a reevaluation of the calculation steps or the assumptions might be necessary. The correct answer based on the provided options and assuming a straightforward application of discounting and exchange rate conversion would be option E, as it is the closest to the expected process of converting future value in Canadian dollars to present value in U.S. dollars, despite the discrepancy in the calculation shown. This highlights a need for clarification or correction in the calculation steps or assumptions used.

You Are Expecting a Payment of C$100,000 Two Years from Now