MAN3600 Dr. Kim FSU Exam 3
Study online at https://quizlet.com/_3by2pi
1. Global Financial Markets independent markets outside the jurisdiction of one country.
2. Convertible Currency can be readily exchanged for other currencies (hard currency
like the USD or Japanese Yen).
3. Nonconvertible Currency not acceptable to international transactions (bartering is often
used instead).
4. Bartering firms receive payment in the forms of products rather than
cash ( developing economies where currency convertibility is
strict).
5. Purpose of Exchange Rates? facilitate international purchases.
6. Implied PPP P(local)/P(U.S.)
ex: $35(RUS)/$2.54(U.S.)=Implied PPP
7. The Law of One Price "The exchange rate based on just one good or service."
8. Purchasing Power Parity (PPP) localized measure of the amount of actual purchasing power
that a consumer has for the purchase of everyday goods and
services in their home country.
9. Per Capita GNP *inferior measure*
shifts with the exchange rate, inflation rate, and other factors
NOT related to consumer purchasing ability.
10. Factors that influence sup- -economic growth
ply/demand of currency: -interest rates/inflation
-market psychology
-gov't action
-trade balance (deficit/surplus)
11. Trade Surplus exports exceed imports (currency is undervalued).
, MAN3600 Dr. Kim FSU Exam 3
Study online at https://quizlet.com/_3by2pi
12. Trade Deficit imports exceed exports (net outflow of foreign exchange).
13. Balance of Trade difference between monetary value of a nations imports vs.
exports (Kenya/Germany example).
14. Foreign Currency Market consists of thousands of telecommunication links between
Structure financial institutions around the globe and is open 24 hours
a day.
15. Spot Transactions the exchange of currencies for immediate delivery.
16. Forward Transactions exchange of currencies on a future date at an agreed upon
exchange rate (usually months).
17. Forward Outrights volume currency trades with maturities of 30 to 360 days.
18. Forward Swaps agreements by 2 parties to trade currencies at a specified
exchange rate for a specified length of time.
19. Foreign Exchange Quotations give the price for a foreign currency in the units of USD need-
(U.S. Terms) ed to purchase one unit of foreign currency (USD/Euro=1.506
USD)
20. Foreign Exchange Quotations give the price of a USD in terms of the foreign currency
(European Terms) equivalent (Euro/USD=.664 Euro)
21. Direct Quotation direct quotation on any currency is the form when that cur-
rency is stated first ("$1.5 *Euro* per Dollar; .664 *USD* per
Euro").
22. Indirect Quotation indirect quotation on a currency refers to when the subject
currency is stated second ("$1.5 Euro per *Dollar*").
23. Cross Rates
Study online at https://quizlet.com/_3by2pi
1. Global Financial Markets independent markets outside the jurisdiction of one country.
2. Convertible Currency can be readily exchanged for other currencies (hard currency
like the USD or Japanese Yen).
3. Nonconvertible Currency not acceptable to international transactions (bartering is often
used instead).
4. Bartering firms receive payment in the forms of products rather than
cash ( developing economies where currency convertibility is
strict).
5. Purpose of Exchange Rates? facilitate international purchases.
6. Implied PPP P(local)/P(U.S.)
ex: $35(RUS)/$2.54(U.S.)=Implied PPP
7. The Law of One Price "The exchange rate based on just one good or service."
8. Purchasing Power Parity (PPP) localized measure of the amount of actual purchasing power
that a consumer has for the purchase of everyday goods and
services in their home country.
9. Per Capita GNP *inferior measure*
shifts with the exchange rate, inflation rate, and other factors
NOT related to consumer purchasing ability.
10. Factors that influence sup- -economic growth
ply/demand of currency: -interest rates/inflation
-market psychology
-gov't action
-trade balance (deficit/surplus)
11. Trade Surplus exports exceed imports (currency is undervalued).
, MAN3600 Dr. Kim FSU Exam 3
Study online at https://quizlet.com/_3by2pi
12. Trade Deficit imports exceed exports (net outflow of foreign exchange).
13. Balance of Trade difference between monetary value of a nations imports vs.
exports (Kenya/Germany example).
14. Foreign Currency Market consists of thousands of telecommunication links between
Structure financial institutions around the globe and is open 24 hours
a day.
15. Spot Transactions the exchange of currencies for immediate delivery.
16. Forward Transactions exchange of currencies on a future date at an agreed upon
exchange rate (usually months).
17. Forward Outrights volume currency trades with maturities of 30 to 360 days.
18. Forward Swaps agreements by 2 parties to trade currencies at a specified
exchange rate for a specified length of time.
19. Foreign Exchange Quotations give the price for a foreign currency in the units of USD need-
(U.S. Terms) ed to purchase one unit of foreign currency (USD/Euro=1.506
USD)
20. Foreign Exchange Quotations give the price of a USD in terms of the foreign currency
(European Terms) equivalent (Euro/USD=.664 Euro)
21. Direct Quotation direct quotation on any currency is the form when that cur-
rency is stated first ("$1.5 *Euro* per Dollar; .664 *USD* per
Euro").
22. Indirect Quotation indirect quotation on a currency refers to when the subject
currency is stated second ("$1.5 Euro per *Dollar*").
23. Cross Rates
