Question
Haier-China can borrow fund in China with an interest rate of 11.47% to invest 1.50 million Australian dollars (A$) and expected return of A$1.96 million
Haier-China can borrow fund in China with an interest rate of 11.47% to invest 1.50 million Australian dollars (A$) and expected return of A$1.96 million next year. Assume that Haier-China and Biopharma-Australia engages in a parallel loan in which the Biopharma-Australia gives Haier-China A$1.50 million in exchange for a loan in Chinese yuan (CNY) at the current exchange rate CNY3.6564/A$. These loans will be repaid by both parties at the end of one year. Assume that next year, Haier-China will pay Biopharma-Australia 14.42% interest on A$1.50 million and that the Biopharma-Australia will pay Haier-China 7.44% interest on the Chinese yuan loan. Also, Haier-China believes that the A$ will depreciate to CNY3.1310/A$ next year. How much the Haier-China will make a profit or loss in CNY from this parallel loan agreement in one year. (enter the whole number with no sign or symbol)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started