BUS 280 EXAM 3 QUESTIONS AND ANSWERS
Base Currency - ANSWER The denominator in a quoted exchange rate, or the
currency that is to be purchased with another currency
Capital Market - ANSWER A system that allocates financial resources in the
form of debt and equity according to their most efficient uses
Countertrade - ANSWER Practice of selling goods or services that are paid
for, in whole or in part, with other goods or services
Cross Rate - ANSWER Exchange rate calculated using two other exchange
rates
Currency Arbitrage - ANSWER Instantaneous purchase and sale of a currency
in different markets for profit
Currency Hedging - ANSWER Practice of insuring against potential losses
that result from adverse changes in exchange rates
Currency Speculation - ANSWER Purchase or sale of a currency with the
expectation that its value will change and generate a profit
Debt - ANSWER Loan in which the borrower promise to repay the borrowed
amount (the principle) plus a predetermined rate of interest
Equity - ANSWER Part ownership of a company in which the equity holder
participates with other part owners in the company's financial gains and losses
Exchange Rate Risk - ANSWER Risk of adverse changes in exchange rates
Forward Markets - ANSWER Market for currency transactions at forward
rates
Forward Rate - ANSWER Exchange rate at which two parties agree to
exchange currencies on a specified future rate
Base Currency - ANSWER The denominator in a quoted exchange rate, or the
currency that is to be purchased with another currency
Capital Market - ANSWER A system that allocates financial resources in the
form of debt and equity according to their most efficient uses
Countertrade - ANSWER Practice of selling goods or services that are paid
for, in whole or in part, with other goods or services
Cross Rate - ANSWER Exchange rate calculated using two other exchange
rates
Currency Arbitrage - ANSWER Instantaneous purchase and sale of a currency
in different markets for profit
Currency Hedging - ANSWER Practice of insuring against potential losses
that result from adverse changes in exchange rates
Currency Speculation - ANSWER Purchase or sale of a currency with the
expectation that its value will change and generate a profit
Debt - ANSWER Loan in which the borrower promise to repay the borrowed
amount (the principle) plus a predetermined rate of interest
Equity - ANSWER Part ownership of a company in which the equity holder
participates with other part owners in the company's financial gains and losses
Exchange Rate Risk - ANSWER Risk of adverse changes in exchange rates
Forward Markets - ANSWER Market for currency transactions at forward
rates
Forward Rate - ANSWER Exchange rate at which two parties agree to
exchange currencies on a specified future rate
