You are a U.S. investor trying to calculate the present value of aeuro €7cmillion cash inflow that will occur one year in the future. The spot exchange rate isUpper S =$1.135/€? and the forward rate isUpper F =$1.157/€. You estimate that the appropriate dollar discount rate for this cash flow is7 %and the appropriate euro discount rate is5 %.a. What is the present value of theeuro €7million cash inflow computed by first discounting the euro and then converting it into? dollars?b. What is the present value of theeuro €7million cash inflow computed by first converting the cash flow into dollars and then discountingc. What can you conclude about whether these markets are internationally integrated based on answers a and b?
You are a U.S. investor trying to calculate the present value of aeuro
by | Sep 6, 2025 | Statistics
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