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The main function of the foreign exchange market
Save the money of a country
convert the currency of one country into the currency of another
don't contribute insurance against foreign exchange risk.
What is the exchange rate?
When the market converts one currency into another.
Saving the money in another country
Which the prices of goods and services are quoted
The short-term movement of funds from one currency to another
What is the Spot exchange rates?
An agreement between two parties to exchange the principal amount of a loan and the interest in one currency for the principal and interest in another currency.
Two parties agree to exchange currency and execute the deal at some specific date in the future.
Agreement between two parties to exchange currency immediately.
Factors that have an important impact on future exchange rate movements in a country's currency:
The country's price inflation, Its interest rate and market psychology
The culture of the country, the currency value.
The country's price inflation, the movements of the market
The market psychology, the determination of the exchange rate.
What does 'PPP' means?
Purchase Products of Prices
Purchase Power Parity
Power of Product Parity
What is the inflation?
Rate at which the level of prices is rising
Rate at which the level of prices is in recession
Rate at which the level of prices is going down
The monetary inflation is:
Changes in the money supply affect both the level of economic activity and the rate of inflation.
The demand of goods and services are above supply, increasing prices and having to spend more.
An increase in production costs (expenses for material and wages), leading to raise the prices of goods and services.
The formula of the Fisher Effect is:
i = r - I
i = r + l
i = r * l
The Transaction Exposure is:
The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values.
The impact of currency exchange rate changes on the reported financial statements of a company. It is concerned with the present measurement of past events
The Monetary Policy Autonomy splits in:
Floating exchange and fixed exchange rates
Floating exchange and Exchange rate parity
Exchange rate depreciation and Fixed exchange rates
Exchange rate parity and Exchange rate depreciation
Types of financial crisis
foreign debit crisis, Mexican crisis, inflation crisis
Banking crisis, Country debt crisis
Currency crisis, banking crisis, foreign debt crisis
Currency crisis, Asian crisis, Exchange rates crisis
Functions of the generic capital market:
Capital makers, market banks, investment markets
Capital money, market makers, cash investment
Borrow market, capital markets, commercial maker, market banks
Capital markets, Market makers, Investment banks, commercial banks
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