Author Question: Firms in Thailand that had borrowed dollars while the baht was pegged to the dollar faced interest ... (Read 91 times)

kwoodring · **on:** Jun 29, 2018

Firms in Thailand that had borrowed dollars while the baht was pegged to the dollar faced interest payments that were ________ than they had planned because the baht had been pegged ________ the equilibrium exchange rate for the baht.

A) higher; below B) lower; below C) lower; above D) higher; above

Question 2

An engineer with a major power company decides to leave his job because he believes he has found a way to deliver Internet service across the electrical grid and he wants to start up his own business. He doesn't have very much cash or collateral.

Which method of financing do you believe he will most likely use and why?

millet · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

Venture capital is his most likely source. The reason is that bank financing is not likely to work because the bank will perceive the venture as being too risky. Also, since he doesn't have any collateral this would be another reason that the loan would not likely be approved. The venture capitalist is still taking on the same risk but is able to spread that risk over a diversified portfolio of different projects.