Mamma Mia Enterprises, a Canadian manufacturer of children's toys, has made a sale in Poland and is

Question:

Mamma Mia Enterprises, a Canadian manufacturer of children's toys, has made a sale in Poland and is expecting a 4 million PLN cash inflow in one year. The current spot rate is 2.040 PLN/ CAD and the one-year forward rate is 2.055 PLN/ CAD.
a. What is the present value of Mamma Mia's 4 million PLN inflow computed by first discounting the cash flow at the appropriate PLN of 10% and then converting the result into CAD?
b. What is the present value of Mamma Mia's 4 million PLN inflow computed by first converting the cash flow into CAD and then discounting at the appropriate CAD of 6%?
c. What can you conclude about whether these markets are internationally integrated, based on your answers to parts (a) and (b)?
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...