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How much the biopharma-australia will make a profit

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Reference no: EM132966150

Problem 1: Biopharma-Australia can borrow fund in Australia with an interest rate of 11.21% to invest 1.62 million Chinese yuan (CNY)  and expected return of CNY2.13 million next year. Assume that Biopharma-Australia and Haier-China engage in a parallel  loan in which the Haier-China gives Biopharma Australia CNY1.62 million in exchange for a loan in Australian dollar (A$) at  the current exchange rate A$0.1964/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 14.33% interest on CNY1.62 million and that the Haier-China will  pay Biopharma-Australia 7.18% interest on the Australian dollar loan. Also, Biopharma-Australia believes that the CNY will  appreciate to A$0.2818/CNY next year. How much the Biopharma-Australia will make a profit or loss in A$ from this  parallel loan agreement in one year?

Reference no: EM132966150

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