Exchange controls for foreign portfolio investments. The Boston-based Flying Dragon emerging market fund (FDE) was planning to purchase 1 million shares of Bangkok Bank at the price of THB 129 when the Bank of Thailand introduced a 30 percent interest-rate-free deposit requirement for any new investment in the stock market. The Thai baht stood at THB 36 = US$1 on December 17, 2010. What is the effective exchange rate for FDE, assuming that it plans on holding the Bangkok Bank stocks for one year and that the opportunity cost of tying funds with the Bank of Thailand is 4 percent per annum? What is the likely impact of this new tax on foreign portfolio investment in Thailand?

Exchange controls for foreign portfolio investments. The Boston-based Flying Dragon emerging market fund (FDE) was planning to purchase 1 million shares of Bangkok Bank at the price of THB 129 when the Bank of Thailand introduced a 30 percent interest-rate-free deposit requirement for any new investment in the stock market. The Thai baht stood at THB 36 = US$1 on December 17, 2010. What is the effective exchange rate for FDE, assuming that it plans on holding the Bangkok Bank stocks for one year and that the opportunity cost of tying funds with the Bank of Thailand is 4 percent per annum? What is the likely impact of this new tax on foreign portfolio investment in Thailand?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 14QA

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