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Int'l Bus. BA251
Chapter 9 International Financial Market
Question | Answer |
---|---|
Discuss the international capital market? | Network of people, firms, financial institutions,& governments borrowing & investing internationally |
What is a borrower? | expands money supply & reduces cost of money |
What is a lender? | spread/reduce risk or offset gains/loses |
Describe the international bond, international equity, & Eurocurrency markets. | International Bond Market-market of bonds sold by issuing companies, governments, & others outside their own countries.Ex. Eurobond,Foreign Bond, Interest rates. International Equity-market of stocks bought & sold outside the issuer's home country.Ex.priv |
What is foreign exchange market? | market in which currencies are bought & sold & their prices are determined |
Identify the foreign exchange market's function? | Conversion-to facilitate sale or purchase, or invest directly abroad,Hedging-insure against potential losses from adverse exchange-rate changes,Arbitrage-instantaneous purchase & sale of a currency in different markets for profit,Speculation-sequential pu |
Explain currency quotes & the rates given? | quoted currency=numerator,base currency=denominatorCross rate-exchange rate calculated using 2 other exchange rates,Spot rate-exchange rate requiring delievery of traded currency within 2 business days,Forward rate-rate at which 2 parties will exchange cu |
Identify the instruments of foreign exchange? | Swap-simultaneous purchase & sale of foreign exchange for 2 different dates,Option-option to exchange a specific amount of a currency on a specific date at a specific rate, Futures contract-contract requiring the exchange of a specific amount of a currenc |
Discuss governments restrictions on currencies? | multiple exchange rate systems, import deposit requirements,quantity restrictions,countertrade |