The princess of Illyria, who has rejected all the fine suitors who have proposed to her, begins to take an interest in a gypsy who wanders around near the castle and who is in fact none other than the prince of Denmark with his friend, Kasper Røghat. The prince entices her with his magical toys, a rattle and a copper kettle, the price being a kiss and a night in the princess's chamber. Casper the Dwarf makes sure that the king is informed of the 'affair', and the princess is thrown out by her father.

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