MKTG 3104 Lecture Notes - Lecture 19: Real Interest Rate, Nominal Interest Rate, The Foreign Exchange

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23 Aug 2016
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Largest financial market with daily trading volumes of more than trillion. Trading dominated by few currencies (u. s. dollar, the japanese yen, and the euro) Major participants include importers/exporters, currency traders, and investors/portfolio managers. Exchange rate: the price of one currency stated in terms of another. Ex: if the exchange rate of a dollar to a euro is . 35 to 1, it would take . 35 to purchase one euro. Direct quote: indicates the number of units of u. s. dollars to buy 1 foreign currency unit. Indirect quote: indicates the number of foreign currency units to buy one american dollar. Example: suppose an american business had to pay ,000 to a british resident on. Cross rate: is the computation of an exchange rate for a currency from the exchange rates of two other currencies. Spot exchange rate: the rate for immediate delivery. Forward exchange rate: a rate agreed upon today, which calls for delivery or payment at a future date.

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