Learning Outcome Statements

1. The Foreign Exchange Market

a. define an exchange rate and distinguish between nominal and real exchange rates and spot and forward exchange rates;

b. describe functions of and participants in the foreign exchange market;

2. Exchange Rate Quotations

c. calculate and interpret the percentage change in a currency relative to another currency;

3. Cross-Rate Calculations

d. calculate and interpret currency cross-rates;

4. Forward Calculations

e. convert forward quotations expressed on a points basis or in percentage terms into an outright forward quotation;

f. explain the arbitrage relationship between spot rates, forward rates, and interest rates;

g. calculate and interpret a forward discount or premium;

h. calculate and interpret the forward rate consistent with the spot rate and the interest rate in each currency;

5. Exchange Rate Regimes

i. describe exchange rate regimes;

6. Exchange Rates, International Trade, and Capital Flows

j. explain the effects of exchange rates on countries' international trade and capital flows.