Question

TropiKana​ Inc., a U.S​ firm, has just borrowed euro​ 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is​ 5.50% per year and the Euro depreciates against the dollar from ​$1.40/euro at the time the loan was made to ​$1.35/euro at the end of the first​ year, how much interest and principle will TropiKana pay at the end of the first year if they repay the entire loan plus interest​ (rounded)?

Answer 1

Total amount borrowed = Euro 1000000

At the time of loan repayment $1.35/Euro

So Principle = 1000000 * 1.35 = $1350000

Interest = 1350000 * 0.055 = $74250

Principle+Interest = 1350000+74250 = $1424250