6. (10 points) A company based in Bangkok, Thailand is considering two alternative loans offered from two different banks. The first is a loan of 1.36 billion Thai baht, which would be repaid in one year with 5.5% interest. The second is a loan of 40 million dollars, which would be repaid in one year with 4.75% interest. The exchange rate of Thai bahts per one U.S dollar is currently 34.0, but is expected to be 34.5 by the end of the one year period.

(a) Based on the two exchange rates (at the time of the loan and the expected exchange rate at the end), what would be the baht value of the dollar amounts received and paid if the second loan is chosen? How do these amounts (in terms of their Thai baht value) compare to the amounts received and paid if the first loan is chosen?

(b) Accounting for the expected change in exchange rates, which is the better offer?