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How much australian dollar the bhp billiton will pa

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Problem 1: BHP Billiton, an Australian Multinational Company, has borrowed fund from China for its subsidiary in China and will pay 2 million Chinese yuan (CNY) including interest in one year. Also, the BHP Billiton has the following market information and considers that the Purchasing Power Parity (PPP) does hold. How much Australian dollar the BHP Billiton will pay that equivalent to 2 million CNY after one year?

Australian dollar (A$)           Chinese yuan (CNY)              Spot rate
Real interest rate p.a.               3.77%                                3.77%
Nominal interest rate p.a.               7.26%                           11.17%
Today's spot rate A$                   0.1615/CNY

Reference no: EM132676267

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