How much the biopharma-australia will make a profit or loss

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Biopharma-Australia can borrow fund in Australia with an interest rate of 11.14% to invest 1.83 million Chinese yuan (CNY) and expected return of CNY2.16 million next year. Assume that Biopharma-Australia and Haier-China engage in a parallel loan in which the Haier-China gives Biopharma Australia CNY1.83 million in exchange for a loan in Australian dollar (A$) at the current exchange rate A$0.2660/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 14.64% interest on CNY1.83 million and that the Haier-China will pay Biopharma-Australia 7.67% interest on the Australian dollar loan. Also, Biopharma-Australia believes that the CNY will depreciate to A$0.2149/CNY next year.

Problem 1: How much the Biopharma-Australia will make a profit or loss in A$ from this parallel loan agreement in one year.

Reference no: EM132795482

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