Appreciation of the chinese currency

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Suppose that there is an asset denominated in Chinese Yuans (Renminbi). Current exchange rate is 6 Renminbi per dollar.

1) If the interest rate in Renminbi is 15% and the investor has assets denominated in dollars and Renminbi in his portfolio. What is the expected depreciation/appreciation of the Chinese currency?

2) Price a tree (in dollars) that delivers 60 Renminbi worth of fruit every year for ever with an interest rate of 15% assuming the exchange rate does not change?

3) Price a tree (in dollars) that delivers 60 Renminbi worth of fruit every year for 10 years with an interest rate of 15% assuming the Renminbi depreciates 1% per year?

Reference no: EM131285858

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