(B) Global Transport (GT), a Swedish transport company with subsidiaries all over Asia, has been funding its Kuala Lumpur subsidiary, GT-Malaysia, primarily with U.S. Dollar ($) debt, because of the cost and availability of Dollar capital, as opposed to with Malaysian Ringgit-denominated (MYR) debt. The treasurer of GT-Malaysia is considering a one-year bank loan for $1,500,000. The current spot rate is MYR 4.31/$, and the Dollar-based interest is 4.75% for the one year period. One year loans are available at 10.00% interest in MYR. Note: Assume there are 360 days in a year. Required: (i) (ii) (iii) For the forthcoming year, according to the purchasing power parity relationship and assuming expected inflation rates of 3.8% and 0.50% in Malaysia and the United States, respectively, what would the effective cost of funds be in MYR terms? (15 marks) If GT-Malaysia's foreign exchange advisers believe strongly that the Malaysian government wants to push the value of the MYR down against the dollar by 2.5% over the coming year, what might the effective cost of funds end up being in MYR terms? Would this change the funding strategy? (15 marks) If GT-Malaysia could borrow MYR at 8% per annum, would this be cheaper than the funding sources on offer in either part (i) or part (ii) above? (10 marks) (iv) Discuss why the purchasing power parity may not hold in reality. (30 marks)