What is the equivalent Australian dollar interest rate for a company that borrows US$10 million for one year at an interest rate of 10% p.a.if the exchange rate was AUD 1 = USD 0.8000 at the time and it was AUD 1 = USD 0.7800 at the repayment date?

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The equivalent Australian dollar interest rate can be calculated by considering both the interest paid in USD and the change in the exchange rate over the period. Initially, the company borrows US$10 million, which is equivalent to AUD 12.5 million (10 million / 0.8). After one year, the company repays the principal plus 10% interest in USD, which totals US$11 million. At the repayment date, the exchange rate is AUD 1 = USD 0.7800, making the repayment amount equivalent to AUD 14.102564 (11 million / 0.78). The increase in the amount in AUD terms is AUD 1.602564 million (14.102564 million - 12.5 million), which represents a 12.8% increase (1.602564 million / 12.5 million) on the original AUD amount.

What Is the Equivalent Australian Dollar Interest Rate for a Company