1. How are percentage changes in a currency’s value measured? Illustrate your answer numerically by assuming a change in the Thai baht’s value from a value of $0.022 to $0.026.

2. What are the basic factors that determine the value of a currency? In equilibrium, what is the relationship between these factors?

3. How might the lose in the confidence in the baht, evidenced by the withdrawal of funds from Thailand, affect the baht’s value? (Assume a constant level of U.S. inflation and interest rates.)

4. How do you think the loss of confidence in the Thai baht, evidenced by the withdrawal of funds from Thailand, will affect the baht’s value? Would Blades be affected by the change in value, given the primary Thai customer’s commitment?

5. Assume that Thailand’s central bank wishes to prevent a withdrawal of funds from its country so as to prevent further changes in the currency’s value. How could it accomplish this objective by manipulating interest rates?

6. Construct a spreadsheet illustrating the steps Blades’ treasurer would need to follow to speculate on expected movements in the baht’s value over the next 30 days. Also show the speculative profit (in dollars) resulting from each scenario. Use both of Ben Holt’s examples to illustrate the possible speculation. Assume that Blades can borrow either $10 million or the baht equivalent of this amount. Furthermore, assume that the following short-term interest rates (annualized) are available to Blades:

Currency	Lending Rate	Borrowing Rate
Dollars	8.10%	8.20%
Thai baht	14.80%	15.40%