MKT 310 Midterm: Exam #3 Cheat Sheet
Document Summary
Foreign exchange market: a market for converting the currency of one country into that of another country. Exchange rate: the rate at which on currency is converted into another. Used by (cid:373)ost ad(cid:448)a(cid:374)(cid:272)ed e(cid:272)o(cid:374)o(cid:373)ies, go(cid:448)er(cid:374)(cid:373)e(cid:374)t refrai(cid:374)s fro(cid:373) i(cid:374)ter(cid:448)e(cid:374)tio(cid:374), ea(cid:272)h (cid:374)atio(cid:374)"s (cid:272)urre(cid:374)(cid:272)(cid:455) floats i(cid:374)depe(cid:374)de(cid:374)tl(cid:455) a(cid:272)(cid:272)ordi(cid:374)g to (cid:373)arket forces, rates determined by forces or demand and supply (ex. China pegs its currency to a basket of currencies, belize pegs their value to the us dollar. Us dollars = foreign currency / exchange rate or foreign currency = us dollar x exchange rate. The exchange rate is 122. 28 yen per usd. Usd = (500 x 100 y) / 122. 28 y = . 90. Spot rates: the rate for an immediate transaction, on a particular day. Forward rates: 3 month, 6 month, 9 month, 12 month, some specific date in the future. Currency swap: simultaneous purchase and sale of a given amount of foreign exchange for 2 different value dates.
