Blades, INC. CASE

Assessment of Future Exchange Rate Movements

As the chief financial officer of Blades, Inc., Ben Holt is pleased that his current system of exporting "Speedos" to Thailand seems to be working well. Blades' primary customer in Thailand, a retailer called Entertainment Products, has committed to purchasing a fixed number of Speedos annually for the next three years at a fixed price denominated in baht, Thailand's currency. Furthermore, Blades is using a Thai supplier for some of the components needed to manufacture Speedos. Nevertheless, Holt is concerned about recent

wonders whether the effects on the Thai baht may affect Blades even though its primary Thai customer is committed to Blades over the next three years.

Second, Holt believes that Blades may be able to speculate on the anticipated movement of the baht, but he is uncertain about the procedure needed to accomplish this. To facilitate Holt's understanding of exchange rate speculation, he has asked you, Blades' financial analyst, to provide him with detailed illustrations of two scenarios. In the first scenario, the baht would move from a current level of $$0\mathrm{.}022$ to $$0\mathrm{.}020$ within the next $30$ days. In the second scenario, the baht would move from its current level to $$0\mathrm{.}025$ within the next $30$ days.

Based on Holt's needs, he has provided you with the following list of questions to be answered:

developments in Asia. Foreign investors from various countries had invested heavily in Thailand to take advantage of the high interest rates there. As a result of the weak economy in Thailand, however, many foreign investors have lost confidence in Thailand and withdrawn their funds.

Holt has two major concerns regarding these developments. First, he wonders how these changes in Thailand's economy could affect the value of the Thai baht and, consequently, Blades. More specifically, he

$6.$ Construct a spreadsheet illustrating the steps that 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 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:

Please answer question $6$ and show how you would do it on a spreadsheet! Please.