Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Biopharma-Australia can borrow fund in Australia with an interest rate of 11.28% to invest 1.89 million Chinese yuan (CNY) and expected return of CNY2.29 million

Biopharma-Australia can borrow fund in Australia with an interest rate of 11.28% to invest 1.89 million Chinese yuan (CNY) and expected return of CNY2.29 million next year. Assume that Biopharma-Australia and Haier-China engage in a parallel loan in which the Haier-China gives Biopharma Australia CNY1.89 million in exchange for a loan in Australian dollar (A$) at the current exchange rate A$0.2649/CNY. These loans will be repaid by both parties at the end of one year. Assume that next year, Biopharma-Australia will pay the Haier-China 14.42% interest on CNY1.89 million and that the Haier-China will pay Biopharma-Australia 7.52% interest on the Australian dollar loan. Also, Biopharma-Australia believes that the CNY will depreciate to A$0.1805/CNY next year. How much the Biopharma-Australia will make a profit or loss in A$ from this parallel loan agreement in one year. (enter the whole number without sign or symbol)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Principles and Applications

Authors: Sheridan Titman, Arthur J. Keown, John H. Martin

13th edition

134417216, 978-0134417509, 013441750X, 978-0134417219

More Books

Students also viewed these Finance questions

Question

entry for paying off short term liability of $7000

Answered: 1 week ago