You are considering a project in Poland which has an initial cost of 275,000PLN.The project is expected to return a one-time payment of 390,000PLN four years from now.The risk-free rate of return is 4.5 percent in the U.S.and 3 percent in Poland.The inflation rate is 4 percent in the U.S.and 2 percent in Poland.Currently,you can buy 277PLN for 100USD.How much will the payment of 390,000PLN be worth in U.S.dollars four years from now?

Question

Quizplus · Accepted Answer

E(S₄) = (277PLN/100USD) × [1 + (0.03 - 0.045)]⁴ = 2.607502245PLNPayment = 390,000PLN ($1/2.607502245PLN) = $149,568

You Are Considering a Project in Poland Which Has an Initial