Save
Busy. Please wait.
Log in with Clever
or
show password
Forgot Password?
Don't have an account?  Sign up 
Sign up using Clever
or
Username is available taken
show password


Make sure to remember your password. If you forget it there is no way for StudyStack to send you a reset link. You would need to create a new account. Your email address is only used to allow you to reset your password. See our Privacy Policy and Terms of Service.

Already a StudyStack user? Log In

Reset Password
Enter the associated with your account, and we'll email you a link to reset your password.
focusNode
Didn't know it?
click below
 
Knew it?
click below
Don't Know
Remaining cards (0)
Know
0:00
edit
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.

  Normal Size     Small Size show me how

IBUS 300 Exam 3

Exam 3 stack

QuestionAnswer
What is exchange rate price of one currency in terms on another
spot rate notation to be differentiated from the forward rate what is in the denominator is what you are taking the price of
bid price price a dealer is willing to pay you
ask price amount the dealer wants you to pay
arbitrage opportunity to buy an asset at a low price then sell it at a higher price
forward market used by importer/exporter to hedge currency risk
central bank intervention central bank can intervene in the FX market to manage exchange rate through supply and demend
rules of central bank can add to fx supply or demand cannot directly decrease private supply or demand currency held by the central bank is not part of the money supply
Law of One Price in the absence of barriers, the price of a good should be the same everywhere
Purchasing Power Parity regarded as the application of LOP in goods and services
Interest Rate Parity regarded as the application of LOP in the capital market
Absolute PPP same good/basket of goods should have the same price in different market
Relative PPP change of exchange rate should equal to the inflation rate differential between 2 countries
FX Currency exposure measures how sensitive a firms domestic currency value is to change
sensitivity Change in firm value / change in exchange rate
what exchange rates affect affects AP and AR value of assets and liabilities competitive position demand for product manufacturing costs
Types of Exposure Economic exposure Translation exposure Transaction exposure Operating exposure
Economic exposure effect of exchange rate change of firm value
Translation exposure effect of exchange rate on consolidated financial statements ( accounting)
Transaction exposure passage of time between start and end of a transaction Financial derivatives are the primary means of hedging transaction exposure
Operating exposure effect of exchange rate changes on firm cash flows
Exchange rate "pass-through" how much of an exchange rate change is reflected int he price
Hedging risk management strategy used in limiting or offsetting probability of loss
Financial Hedging without derivatives: money market hedging with derivatives: forward market
Money market hedging buy certain amount of that foreign currency today and sit on it buy PV today. Invest at the foreign rate, your ivestment will have grown at maturity
Forward Contract Hedging if you owe foreign currency, agree to buy in foreign currency by entering into long position. if you are going to receive in foreign currency, agree to sell the foreign currency now by entering into short position
Currency invoice firm can shift, share, or diversify
shift exchange rate risk invoicing foreign sales in home currency
share exchange rate risk by pro-rating currency of the invoice between foreign and home currencies
diversify exchange rate risk by using a market basket index
Match currency AP and AR produce and/or buy inputs in the same currency where you have sales (BMW)
Manage debt currency borrow in currencies with same denomination as revenues
Diversify product markets sell in multiple markets
diversity sources of input sourcing inputs from different country in different currency
Bimetallism before 1875 both gold and silver the least valuable metal would tend to circulate
Gold standard 1875-1914 exchange rate between two country's currencies would be determined by their relative gold contents stable ratio when converting currencies automatic adjustment mechanism
Interwar period 1915-1944 Exchange rates fluctuated as countries depreciated their currencies
Bretton Woods system Gold-dollar standard US fixed value of dollar in terms of gold dollar devaluation
floating exchange rate system private supply and demand determine equilibrium no central bank purchase/sales depreciation reduces an overall BoP deficit Appreciation reduces a surplus
fixed exchange rate system government declares a target level of the exchange rate central bank invervenes in fx market by buying or selling amount of fx
Created by: yaro_kobzar
Popular Business sets

 

 



Voices

Use these flashcards to help memorize information. Look at the large card and try to recall what is on the other side. Then click the card to flip it. If you knew the answer, click the green Know box. Otherwise, click the red Don't know box.

When you've placed seven or more cards in the Don't know box, click "retry" to try those cards again.

If you've accidentally put the card in the wrong box, just click on the card to take it out of the box.

You can also use your keyboard to move the cards as follows:

If you are logged in to your account, this website will remember which cards you know and don't know so that they are in the same box the next time you log in.

When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out.

To see how well you know the information, try the Quiz or Test activity.

Pass complete!
"Know" box contains:
Time elapsed:
Retries:
restart all cards