At what ending exchange rate would aireasia be indifferent

Reference no: EM13243129

AireAsia. AireAsia, headquartered in Kunming, China, needs US$25,000,000 for one year to finance working capital. The airline has two alternatives for borrowing:
1) Borrow US$25,000,000 in Eurodollars in London at 7.250% per annum.
2) Borrow HK$39,000,000 in Hong Kong at 7.00% per annum, and exchange these Hong Kong dollars at the present exchange rate of HK$7.8/US$ for U.S. dollars.
At what ending exchange rate would AireAsia be indifferent between borrowing U.S. dollars and borrowing Hong Kong dollars?

Reference no: EM13243129

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