1) What exchange rate that would make the subsidiary be indifferent between borrowing in Malaysia and in US? (4 marks)

Question A London subsidiary, headquartered in Malaysia, could borrow one-year short-term financing at 5% in Malaysia or 6% in the London. The Ringgit: Dollar exchange rate is expected to move from MYR5.3600/GBP to MYR5.3800/GBP by year-end. The Malaysian government charges 20% of the corporate tax for that year