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SCHOENHOLTZ
Chapter Ten
Foreign Exchange
McGraw-Hill/Irwin
Introduction
Global business includes goods, services,
stocks, bonds, etc. around the globe.
To understand the nature of these transactions,
we must become familiar with exchange rates.
All cross-border transactions have a buyer and
a seller that want to use their own currency.
The exchange rate, at it most basic level, is the
tool we use to measure the price of one
currency in terms of another.
10-2
Introduction
In this chapter we will discuss:
How foreign exchange rates are determined,
What accounts for their fluctuations over days,
months, years, and decade, and
The connection of foreign exchange rates and
exchange markets.
10-3
10-4
10-6
10-7
10-8
10-9
10-10
10-12
Dollarpriceofdomesticgoods
Dollarpriceofforeigngoods
10-13
10-14
10-16
Foreign Exchange
Markets
Because of its liquidity, the U.S, dollar is one
side of roughly 85 percent of the currency
transactions.
If you want to exchange Thai baht for Japanese
Yen, you likely have to perform two
transactions:
Thai baht for U.S. dollars and then
U.S. dollars for Japanese yen.
10-18
10-19
10-20
10-24
10-25
10-29
10-30
An excerpt from
Table 10.5
10-33
10-36
10-38
10-39
10-40
10-42
10-43
An increase in demand
leads to an appreciation
of the dollar.
10-44
10-45
10-47
S0
S1
E0
E1
D1
D0
10-49
10-50
10-51
10-54
End of
Chapter Ten
Foreign Exchange
McGraw-Hill/Irwin