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How much the Haier-China will make a profit or loss

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Question - Haier-China can borrow fund in China with an interest rate of 11.06% to invest 1.77 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$1.77 million in exchange for a loan in Chinese yuan (CNY) at the current exchange rate CNY3.3848/A$. These loans will be repaid by both parties at the end of one year. Assume that next year, Haier-China will pay Biopharma-Australia 14.45% interest on A$1.77 million and that the Biopharma-Australia will pay Haier-China 7.28% interest on the Chinese yuan loan. Also, Haier-China believes that the A$ will appreciate to CNY3.5106/A$ next year. How much the Haier-China will make a profit or loss in CNY from this parallel loan agreement in one year?

Reference no: EM132777677

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