Assume the 1-year Treasury rate is 3% and that the Brazilian central bank rate is 12%. The 12-month forward exchange rate is 1.75 Brazilian real per dollar, and the spot exchange rate is
1.63 real per dollar. If an American firm's Brazilian subsidiary has a project that will return 10
Million Brazilian real for certain at the end of a year, what is this project's present value?
Round your answer to the nearest ten thousand dollars.
A) $16.99 million
B) $15.63 million
C) $5.55 million
D) $5.10 million
Correct Answer:
Verified
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