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Presentation
A case study solve on
Blade Inc
 Introduction
 Here we are going to discus about 5 question from a case
study and also discuss this questions solution . This case study
based on Blade Inc.
 Q-1
How are percentage changes in a currency’s value measured?
Illustrate your answer numerically by assuming a change in the
Thai baht’s value from a value of $0.022 to $0.026.
 Solution
To calculate the percentage - change in a currency’s
value this equation is used:
=S−S(t−1)/S(t−1)
S is the spot rate and S(t-1) is de spot rate but from an
earlier date. So if we apply it in this question it
would be:
$ 0.026 − $ 0.022 /$ 0.022
= 18.18
Because it is a positive percentage change the Baht
would appreciate by 18.18%
 Q-2
What are the basic factors that determine the value of a
currency? In equilibrium, what is the relationship between
these factors?
 Solution
The supply of the currency for sale and the demand for the
currency are the basic factors that define how much the
currency is worth. Because in that way people are able to see
what goes in and out of a country. In equilibrium the supply
and demand are at an equal point. But if the supply is high than
usually the currency’s value decrease and if the demand is high
usually the value of the currency increases.
 Q-3
How might the relatively high levels of inflation and interest
rates in Thailand affect the baht’s value. (Assume a constant
level of U.S. inflation and interest rates.)
 Solution
Both inflation and interest would be affected. If there is a high
level of inflation, it usually results in a currency depreciation, and
that would result in an increase in buying goods in the U.S, that
would cause an increase in the Thai demand for dollars. Because
Thai people need dollars to buy U.S. goods. Also, a high level of
inflation would reduce the U.S. demand for Thai goods, people
are less tempted to buy goods in Thailand and that would cause an
increase in the supply of baht for a lower price.
 Solution
On the other hand, a high level of interest rates can cause
appreciation of the bath instead of depreciation. A high level of
interest rates in Thailand would make it more attractive for U.S
investors to invest in Thailand, that would cause an increase in
the demand for the baht because they need the baht for their
investments. And it would be less attractive for the Thai
investors to invest in the U.S., which would cause an increase
in the supply in dollar for a lower price.
 Q-4
How do you think the loss of confidence in the Thai baht,
evidenced by the withdrawal of funds from Thailand, will
affect the baht’s value? Would Blades be affected by the
change in value, given the primary Thai customer’s
commitment?
 Solution
Normally, depreciation results when the investors withdraw
their investment from the country they invested in. That would
cause an increase in the sale of the currency. Because they
need to keep the prices low in order that people still buy the
currency. There would be a high chance Blades would be
affected as well by this change because the sales are in baht.
The depreciation in the baht would cause an exchange of the
baht income into fewer U.S. dollars.
 Q-5
Assume that Thailand’s central bank wishes to prevent a
withdrawal of funds from its country in order to prevent further
changes in the currency’s value. How could it accomplish this
objective using interest rates?
 Solution
If Thailand’s central bank wishes to prevent further
depreciation in the baht’s value, it would attempt to increase
the level of interest rates in Thailand. In turn, this would
increase the demand for Thai baht by U.S. investors, as Thai
securities would now seem more attractive. This would place
upward pressure on the currency’s value. However, the high
interest rates could reduce local borrowing and spending.