Problem:
Suppose the current spot rate for the Norwegian kroner is $1 = NKr6.6869. The expected inflation rate in Norway is 6 percent and in the U.S. it is 3.1 percent. A risk-free asset in the U.S. is yielding 4 percent.
Required:
Question: What risk-free rate of return should you expect on a Norwegian security?
- 4.0 percent
- 4.5 percent
- 3.5 percent
- 6.9 percent
- 5.0 percent
Note: Please show guided help with steps and answer.