{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 9 Student P10 MGT 302

Chapter 9 Student P10 MGT 302 - ChapterNine KeyConcepts...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter Nine The Foreign Exchange Market
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Key Concepts: The factors that impact exchange rates The micro and macro implications of  exchange rate changes Approaches for forecasting exchange  rates Techniques to protect against exchange  rate risk
Background image of page 2
Exchange Rates An exchange rate is the rate at which one  currency is converted into another. $1 =  0.6936 To calculate the reciprocal exchange rate,  divide the known rate into 1.0. 1 = $1.44 (1.0/.6936)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Currency Appreciation and Depreciation The market forces of supply and demand cause  currencies to gain or lose value. A currency is said to appreciate when it increases in  value compared to another currency; the currency  can be used to purchase more foreign currency units  than it could in the past. A currency is said to depreciate if it declines in value  compared to another currency; a given quantity of the  currency can purchase fewer foreign currency units  than it could in the past.
Background image of page 4
Currency Devaluation and Revaluation Currency devaluations and revaluations are the  result of government actions including the  changing of fixed exchange rate systems or the  buying and selling of foreign exchange reserves. Devaluation is the deliberate downward  adjustment in the exchange rate. Revaluation is an upward change in the  currency’s value. 
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Exchange Rates: March 1, 2010 Euro British Pound Japanese Yen Canadian  Dollar Australian  Dollar 1 USD .7428 .6707 89.225 1.0468 1.1146 52 Week  Range .6603 - . 8028 .5868 - .7324 85.365 – 101.480 1.0207 - 1.3068 1.0631 - 1.5911 Yahoo Finance. Accessed 3-1-2010.
Background image of page 6
Spot Exchange Rate: the exchange rate at  which a foreign exchange dealer would  convert one currency into another  currency on that day Forward Exchange Rate: the exchange  rate at which a foreign exchange dealer  will agree to convert one currency into  another currency on a specific date in the  future
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Forward Exchange Rates Selling on a Discount: foreign exchange  dealers expect the home currency to  depreciate; a USD could buy more of a  foreign currency today than in the future at  the forward rate
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}