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Discuss the three (3) main types of exchange rate quotations found in the foreign
exchange markets
Step by step
Solved in 3 steps
- Define each of the following terms: a. Multinational corporation b. Exchange rate; fixed exchange rate system; floating exchange rate c. Trade deficit; devaluation; revaluation d. Exchange rate risk; convertible currency; pegged exchange rate e. Interest rate parity; purchasing power parity f. Spot rate; forward exchange rate; discount on forward rate; premium on forward rate g. Repatriation of earnings; political risk h. Eurodollar; Eurobond; international bond; foreign bond i. The euroexplain each factors of foreign exchange marketsGive full definition of the market for foreign exchange.
- Which of the following factors influences the spread between forward and spot rates? a. which currency is denominated as the domestic currency b. the length of the forward exchange contract c. the current cross rate between the two currencies d. all are factors that may influence the spreadWhich of the following combinations correctly describes the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses?Define each of the following terms: b. Exchange rate; fixed exchange rate system; floating exchange rate
- Explain the implications of interest rate parity and purchasing power for U.S. dollar exchange rate against the Euro. Then, evaluate the usefulness of relative PPP in predicting movements in foreign exchange rates on (i) the short-term basis and (ii) the long terms basis.Define each following terms: i. American terms; European terms j. Direct quotation; indirect quotation k. Spot rate; forward exchange rate l. Discount on forward rate; premium on forward rateExplain six characteristics of the foreign exchange market as revealed by the Bank forInternational Settlements (BIS) surveys
