1 What type(s) of exposure (i.e., transaction, economic, or translation exposure) is Blades subject to? Why?

Blades plc is currently exporting roller blades to Thailand and importing certain components needed to manufacture roller blades from that country. Under a fixed contractual agreement, Blades’ primary customer in Thailand has committed itself to purchase 180 000 pairs of roller blades annually at a fixed price of 4594 Thai baht (THB) per pair. Blades is importing rubber and plastic components from various suppliers in Thailand at a cost of approximately THB2871 per pair, although the exact price (in baht) depends on current market prices. Blades imports materials sufficient to manufacture 72 000 pairs of roller blades from Thailand each year. The decision to import materials from Thailand was reached because rubber and plastic components needed to manufacture Blades’ products are inexpensive, yet high quality, in Thailand.

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Currency Expected exchange rate Range of possible exchange rates US dollar 0.67 0.68 to 0.65 Japanese yen 0.0055 0.0053 to 0.0058 Thai baht 0.016 0.013 to 0.019