You Want to Invest in a Riskless Project in Sweden

question 24

Multiple Choice

You want to invest in a riskless project in Sweden. The project has an initial cost of SKr2.1 million and is expected to produce cash inflows of SKr810,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Sweden is 2 percent while it is 5 percent in the U.S. A risk-free security is paying 6 percent in the U.S. The current spot rate is $1 = SKr7.55. What is the net present value of this project in Swedish krona using the foreign currency approach? Assume that the international Fisher effect applies.

• A) SKr185,607
• B) SKr191,175
• C) SKr196,910
• D) SKr197,867
• E) SKr202,818

---

Definitions:

Government

The organization, or group of people governing an organized community, often a state, and responsible for the creation and enforcement of laws.

Governmental Classification

The organization or categorization of information, individuals, or entities by a government based on certain criteria.

Defamation

The act of damaging someone's reputation by making false and harmful statements.

Actual Malice

In defamation law, the requirement to prove the defendant made a statement with knowledge of its falsity or with reckless disregard for the truth.