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