Chapter 3 note

Chapter 3 note - Measuring exchange rate movements - an...

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Measuring exchange rate movements - an exchange rate measures the value of one currency in units of another currency. - When a currency declines in value, it is said to depreciate. When it increases in value, it is said to appreciate. Depreciate or appreciate is a function of the market, of what the rate is going to be. (devalue of revalue), floating rate, govt doesn’t have to do anything. - On the days when some currencies appreciate while others depreciate against a particular currency, that currency is said to be “mixed in trading”. - The percentage change in the value of a foreign currency is computed as S t – S t-1 S t-1 Where St, denotes the spot rate at time t. - A positive % change represents appreciation of the foreign currency. Exchange rate equilibrium - An exchange rate represents the price of a currency, which is determined by the demand for that currency relative to the supply for that currency. -
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This note was uploaded on 09/01/2008 for the course FIN 370 taught by Professor Storey during the Spring '08 term at CSU Fullerton.

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Chapter 3 note - Measuring exchange rate movements - an...

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