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. What risk-free rate of return should you expect on a Norwegian security?
A. 4.5 percent
B. 4.0 percent
C. 6.9 percent
D. 5.0 percent
E. 3.5 percent
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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.
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