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What ending exchange rate would morning star air be

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Reference no: EM132729285

Morning Star Air? (China).

Morning Star? Air, headquartered in? Kunming, China, needs ?US$23,000,000 for one year to finance working capital. The airline has two alternatives for? borrowing:

  1. Borrow ?US$23,000,000 in Eurodollars in London at 7.35?% per annum
  2. Borrow ?HK$179,924,400 in Hong Kong at 7.05?% per? annum, and exchange these Hong Kong dollars at the present exchange rate of ?HK$7.8228?/US$ for U.S. dollars.

Question 1: At what ending exchange rate would Morning Star Air be indifferent between borrowing U.S. dollars and borrowing Hong Kong? dollars?

Question 2: Morning Star Air would be indifferent between borrowing U.S. dollars and borrowing Hong Kong dollars if the ending exchange rate is ?HK$? ?(Round to four decimal? places.)

Reference no: EM132729285

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