The inflation rates in the USA and in Thailand are 3% and 5%, respectively. Expansion projects in the area of manufacturing typically bring a 7% annual return in Thailand. If a USA-based company wanted to expand its operations in Thailand, it would need to use _____________% for the discount rate in order to calculate the project's Net Present Value using the foreign currency approach.

In general, in real terms, the relevant discount rate for a project should be the same regardless of which country it is taking place. This is based on the ________________. Pick a number that corresponds to the correct item in the table below.

1	Interest Rate Parity
2	Unbiased Forward Rates
3	Cross-rate
4	International Fisher Effect
5	Covered Interest Arbitrage