Chapter 22: international financial
management
1. Foreign exchange markets
• Exchange rate
Amount of one currency needed to purchase one unit of another
=price of one currency expressed in another
Spot exchange rate
Exchange rate for an immediate transaction (=on the spot)
• Forward exchange rate
Exchange rate for a future transaction (=forward in time)
spot rates
Forward rates
• Buying a forward contract
- = contract to buy at some point in the future at a price agreed today (= forward price)
management
1. Foreign exchange markets
• Exchange rate
Amount of one currency needed to purchase one unit of another
=price of one currency expressed in another
Spot exchange rate
Exchange rate for an immediate transaction (=on the spot)
• Forward exchange rate
Exchange rate for a future transaction (=forward in time)
spot rates
Forward rates
• Buying a forward contract
- = contract to buy at some point in the future at a price agreed today (= forward price)