You are considering a project in Norway with an initial cost of NKr135,000.The project is expected to return a one-time payment of NKr200,000 at the end of Year 5.Assume the risk-free rate of return is 2.6 percent in the U.S.and 3.1 percent in Norway.Assume the inflation rate is 1.6 percent in the U.S.and 2.3 percent in Norway.Lastly,assume the current exchange rate is $1 = NKr7.9271.Approximately how much will the payment at the end of 5 Years be worth in U.S.dollars?

Question

Quizplus · Accepted Answer

The correct answer is A because the payment at the end of 5 years will be worth $24,609 in U.S. dollars. This is calculated by first converting the payment to U.S. dollars using the current exchange rate, which gives us NKr200,000 / 7.9271 = $25,238.09. We then need to adjust this amount for inflation in the U.S. over the next 5 years, which gives us $25,238.09 * (1 + 0.016)^5 = $24,609.

You Are Considering a Project in Norway with an Initial