Question 1 The East Asiatic Company (EAC), a Danish company with subsidiaries all over 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 bath (B) uids. The treasurer of BAG-Thailand is considering a one-year bank loan for $350,000. The current sport exchange rate is 342.84%, and the dollar-based interest is 8.885% for the one year period. a) Assuming expected inflation rates of 4.50% and 2.20% in Thailand and United States for the coming year respectively. According to purchasing power parity, what would the effective cost of funds be in Thai baht terms? b) If EAC's foreign exchange advisors believe strongly that the Thai government wishes to push the value of baht down against the dollar by 5% over the coming year( to promote its export competitiveness in dollar markets), What might the effective cost of fimds end up being in baht terms? c) If EAC could borrow Thai baht at 14% per annum, would this option be more cost effective than part (a) or part (b) above