Compton Co. has a subsidiary in Thailand that produces computer components. The subsidiary sells the components to
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a. Given the conditions, is Compton affected favorably or unfavorably, or not affected by depreciation of the Thai baht? Briefly explain.
b. Assume that interest rates in Thailand declined recently, so Compton subsidiary considers obtaining a new loan in Thai baht. Compton would use the proceeds to pay off its existing loan from a U.S. bank. Will this form of financing increase, reduce, or have no impact on its economic exposure to exchange rate movements? Briefly explain.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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