Reading 18. Currency Exchange Rates
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Learning Outcome Statements
|Reading 18. Currency Exchange Rates|
|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.