You are expecting a payment of Can$150,000 four years from now.The risk-free rate of return is 3.9 percent in the United States and 4.6 percent in Canada.The inflation rate is 3 percent in the United States and 4.2 percent in Canada.Assume the current exchange rate is Can$1 = $.87.How much will the payment four years from now be worth in U.S.dollars?

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Quizplus · Accepted Answer

E(S₄)= (Can$1 / $.87)[1 + (0.046 − 0.039)]⁴ = Can$1.1819/$1 Can$150,000($1 / Can$1.1819)= $126,909

You Are Expecting a Payment of Can$150,000 Four Years from Now.The