You are expecting a payment of C$100,000 four 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 = $0.8273.How much will the payment four years from now be worth in U.S.dollars?

Question

Quizplus · Accepted Answer

E(S₄) = (C$1/$0.8273) × [1 + (0.041 - 0.038)]⁴ = C$1.223321779C$100,000 × ($1/C$1.223321779) = $81,745

You Are Expecting a Payment of C$100,000 Four Years from Now.The