Suppose the current spot rate for the Norwegian kroner is $1 = NKr6.7119. The expected inflation rate in Norway is 4 percent

Suppose the current spot rate for the Norwegian kroner is $1 = NKr6.7119. The expected inflation rate in Norway is 4 percent and in the U.S. 3 percent. A risk-free asset in the U.S. is yielding 4.5 percent. What approximate real rate of return should you expect on a risk-free Norwegian security?    A.  1.0 percent B.  1.5 percent C.  2.0 percent D.  2.5 percent E.  3.0 percent Approximate real rateN = Approximate real rateU.S. = 0.045 - 0.03 = 1.5 percent

79.

The expected inflation rate in Finland is 2.8 percent while it is 3.2 percent in the U.S. A risk-free asset in the U.S. is yielding 4.9 percent. What approximate real rate of return should you expect on a risk-free Finnish security?    A.  1.2 percent B.  1.7 percent C.  2.1 percent D.  2.5 percent E.  2.8 percent Approximate real rateF = Approximate real rateU.S = 0.049 - 0.032 = 1.7 percent

80.

You want to invest in a project in Canada. The project has an initial cost of C$2.2 million and is expected to produce cash inflows of C$900,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Canada is 4 percent while it is only 3 percent in the U.S. The applicable interest rate for the project in Canada is 13 percent. The current spot rate is C$1 = $0.8158. What is the net present value of this project in Canadian dollars?    A.  -C$91,889 B.  -C$87,924 C.  -C$74,963 D.  C$165,139 E.  C$167,528

81.

You want to invest in a riskless project in Sweden. The project has an initial cost of SKr3.8million and is expected to produce cash inflows of SKr1.75 million a year for three years. The project will be worthless after three years. The expected inflation rate in Sweden is 3.2 percent while it is 4.3 percent in the U.S. A risk-free security is paying 5.5 percent in the U.S. The current spot rate is $1 = SKr7.7274. What is the net present value of this project in Swedish kroner? Assume the international Fisher effect applies.    A.  SKr587,561 B.  SKr701,458 C.  SKr823,333 D.  SKr958,029 E.  SKr1,019,774 0.055 - 0.043 = RFC - 0.032; RFC = 0.044