ONLY NEED THE ANSWER TO NUMBER 4 NOT NUMBER 1.

Please put source of info as well

BLADES, INC. CASE Assessment of Government Influence on Exchange Rates Recall that Blades, the U.S. manufacturer of roller intervention was unsuccessful, as it was overwhelmed by market forces. Consequently, the Thai government blades, generates most of its revenue and incurs mos of its expenses in the United States. However, the com ceased its intervention efforts, and the value of the pany has recently begun exporting roller blades to Thai baht declined substantially against the dollar over a Thailand. The company has an agreement with Enter 3-month period tainment Products, Inc., a Thai importer, for a 3-year When the Thai government stopped intervening in period. According to the terms of the agreement, the foreign exchange market, Ben Holt, Blades' CFO Entertainment Products will purchase 180,000 pairs of was concerned that the value of the Thai baht would Speedos," Blades' primary product, annually at a fixed continue to decline indefinitely. Since Blades generates price of 4,594 Thai baht per pair. Due to quality and net inflow in Thai baht, this would seriously affect the is also importing certain company's profit margin. Furthermore, one of the rea cost considerations, Blade sons Blades had expanded into Thailand was to appease rubber and plastic components from a Thai exporter the company's shareholders. At last year's annual share The cost of these components is approximately 2,8 Thai baht per pair of Speedos. No contractual agree holder meeting, they had demanded that senior manage ment exists between Blades, Inc., and the Thai exporter ment take action to improve the firm's low profit Consequently, the cost of the rubber and plastic com margins. Expanding into Thailand had been Holt's sug ponents imported from Thailand is subject not only to gestion, and he is now afraid that his career might be at exchange rate considerations but to economic condi stake. For these reasons, Holt feels that the Asian crisis tions (such as inflation) in Thailand as well and its impact on Blades demand his serious attention Shortly after Blades began exporting to and importing One of the factors Holt thinks he should consider is the from Thailand, Asia experienced weak economic condi issue of government intervention and how it could affect tions. Consequently, foreign investors in Thailand feared Blades in particular. Specifically, he wonders whether the the baht's potential weakness and withdrew their inve decision to enter into a fixed agreement with Entertain ments, resulting in an excess supply of Thai baht for sale. ment Products was a good idea under the circumstances. Because of the resulting downward pressure on the baht Another issue is how the future completion of the swap value, the Thai government attempted to stabilize the agreement initiated by the Thai government will affect baht's exchange rate. To maintain the baht's value, the Blades. To address these issues and to gain a little more Thai government intervened in the foreign exchange understanding of the process of government interven market. Specifically, it swapped its baht reserves for dol tion, Holt has prepared the following list of questions lar reserves at other central banks and then used its dol for you, Blades' financial analyst, since he knows that lar reserves to purchase the baht in the foreign exchange you understand international financial management. market. However, this agreement require Thailand to Did the intervention effort by the Thai government reverse this transaction by exchanging dollars for baht constitute direct or indirect intervention? Explain. at a future date. Unfortunately, the Thai government