Chapter 10 - The foreign exchange market. In this chapter, students will be able to understand: Describe the functions of the foreign exchange market. Understand what is meant by spot exchange rates. Recognize the role that forward exchange rates play in insuring against foreign exchange risk,. | International Business 9e By Charles . Hill McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 The Foreign Exchange Market Why Is The Foreign Exchange Market Important? The foreign exchange market is used to convert the currency of one country into the currency of another provides some insurance against foreign exchange risk - the adverse consequences of unpredictable changes in exchange rates The exchange rate is the rate at which one currency is converted into another events in the foreign exchange market affect firm sales, profits, and strategy LO1: Describe the functions of the foreign exchange market. When Do Firms Use The Foreign Exchange Market? International companies use the foreign exchange market when the payments they receive for exports, the income they receive from foreign investments, or the income they receive from licensing agreements with foreign firms are in foreign currencies they must pay a foreign company for its products or services in its country’s currency they have spare cash that they wish to invest for short terms in money markets they are involved in currency speculation - the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates What Is The Difference Between Spot Rates And Forward Rates? The spot exchange rate is the rate at which a foreign exchange dealer converts one currency into another currency on a particular day spot rates change continually depending on the supply and demand for that currency and other currencies Spot exchange rates can be quoted as the amount of foreign currency one . dollar can buy, or as the value of a dollar for one unit of foreign currency LO2: Understand what is meant by spot exchange rates. What Is The Difference Between Spot Rates And Forward Rates? Value of the . Dollar Against Other Currencies 2/12/11 What Is The Difference Between Spot Rates And Forward Rates? To insure or hedge | International Business 9e By Charles . Hill McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 The Foreign Exchange Market Why Is The Foreign Exchange Market Important? The foreign exchange market is used to convert the currency of one country into the currency of another provides some insurance against foreign exchange risk - the adverse consequences of unpredictable changes in exchange rates The exchange rate is the rate at which one currency is converted into another events in the foreign exchange market affect firm sales, profits, and strategy LO1: Describe the functions of the foreign exchange market. When Do Firms Use The Foreign Exchange Market? International companies use the foreign exchange market when the payments they receive for exports, the income they receive from foreign investments, or the income they receive from licensing agreements with foreign firms are in foreign currencies they must pay a foreign company .
