1 There is a tradeoff between the higher interest rates in Thailand and the delayed conversion of baht into pounds. Explain what this means.

Recall from Chapter 18 that the new Thailand subsidiary of Blades plc received a one-time order from a customer for 120 000 pairs of ‘Speedos’, Blades’ primary product. There is a six-month lag between the time when Blades needs funds to purchase material for the production of the Speedos and the time when it will be paid by the customer. Ben Holt, Blades’ chief financial officer (CFO), has decided to finance the cost by borrowing Thai baht at an interest rate of 6% over a six-month period. Since the average cost per pair of Speedos is approximately 3500 baht, Blades will borrow 420 million baht. The payment for the order will be used to repay the loan’s principal and interest.