International Finance Assignment PDF

Running head: INTERNATIONAL FINANCE
International finance
Name of the Student:
Name of the university:
Authors note:

INTERNATIONAL FINANCE1
Table of Contents
PART A:.....................................................................................................................................2
Answer to question1...................................................................................................................2
Answer to question 2..................................................................................................................2
Answer to question 3..................................................................................................................3
Answer to question 4..................................................................................................................5
PART B:.....................................................................................................................................5
Answer to question 1:.................................................................................................................5
Answer to question 2..................................................................................................................8
Answer to question 3..................................................................................................................8
Reference..................................................................................................................................10
Appendices...............................................................................................................................12

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PART A:
Answer to question1.
The increased rate of interest present in Thailand is a testimony to the uncertainty
prevailing in its economy. Hence, it can be anticipated reasonable that the value of Baht is
going to depreciate in the near future which will result in lower amount of Australian Dollars
being received by the company in exchange of same number of Baht (Boriob et al., 2017).
Hence, it is prudent that despite the lower interest rate of investments in Australia, the
company should refrain from investing it in Thailand at a higher rate of interest. This is
because even if the company is getting a higher rate of interest the benefits of the same will
no accrue to the company if the value of Baht currency declines disproportionately in the
future.
Answer to question 2.
In case the excess funds earned in Thailand are invested back in Thailand then the
company will need more money that it might have to fulfil by taking a loan back in Australia
at the prevalent rate of 10%. The additional funds so acquired will be instrumental in
supporting the operations in Australia (Avdjiev et al., 2016). The funds that were supposed to
be remitted back to Australia for investment purposes at 8% rate of interest will no longer be
available for the same purpose. Furthermore, if the Baht’s value reduces by 5% as the studies
suggest then investments made in Thailand will be yielding an interest of 9.25%. Hence, it

INTERNATIONAL FINANCE3
can be seen that in case the company is reinvesting the excess money earned in Thailand.
Then along with borrowing money for the additional funds required for carrying out the
operations in Australia the returns that the company was, getting from Thailand will also
decrease in the near future, which will be detrimental to the interest of the company (Titman
et al., 2017).
Answer to question 3.
The analysis as given below depicts the comparison between the two options available
with the company. At present the company can either invest the funds back in Thailand or
exchange them and remit them back to Australia. If the second one of the two options is
exercised then the company will be enjoying a gain of $8389001.34
Particulars Amount
Calculation of revenue denominated in baht
Speedos price per pair 4,594.00THB
number of pair of speedos 180000
Revenue in Baht 826,920,000.00THB
Cash Flow available in baht
Revenue in Baht 826,920,000.00THB
Cost of goods sold 516,780,000.00THB
Cash flow available in baht 310,140,000.00THB
Calculation of dollar receipt as baht is converted in dollar in one year
Cash flow available in baht 310,140,000.00THB
Interest earned on baht for a one year period (15%) 46,521,000.00THB
The conversion that will be made in one year 356,661,000.00THB
Expected spot rate in one year 0.0361
Expected dollar receipt in a period of one year 12,875,462.10$
Plan 1: Investment in Thiland