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East Asiaticlong dashThailand. The East Asiatic Company ( EAC ) , a Danish company with subsidiaries throughout Asia, has been funding its Bangkok subsidiary primarily
East Asiaticlong dashThailand. The East Asiatic CompanyEAC a Danish company with subsidiaries throughout Asia, has been funding its Bangkok subsidiary primarily with US dollar debt because of the cost and availability of dollar capital as opposed to Thai bahtdenominated THB debt. The treasurer of EACThailand is considering ayear bank loan for USD comma The current spot rate is THB USD and the dollarbased interest is for theyear period.year loans are in baht.
a Assuming expected inflation rates for the coming year of and in Thailand and the United States, respectively, according to purchase power parity, what would be the effective cost of funds in Thai baht terms?
b If EAC's foreign exchange advisers believe strongly that the Thai government wants to push the value of the baht down against the dollar by over the coming yearto promote its export competitiveness in dollar markets what might be the effective cost of funds in baht terms?
c If EAC could borrow Thai baht at per annum, would this be cheaper than either parta or partb
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