To buy the car costs RM70,000, 24,500,000 Won is needed to be exchanged. There are two main methods that could determine the price of currencies against others, fixed rate and flexible rate. Fixed exchange rate is the rate that has been constant at official rate. The rate could not be maintained constant due to trading activities. To maintain the exchange rate fixed, the government takes any measures to prevent from fluctuating, such as buying or selling their currency.
Currency fluctuation: A currency has value or worth in relation to other currencies and those values change constantly. For example, if demand for a particular currency is high because investors want to invest in that country's stock market or buy exports, the price of its currency will increase. Just the opposite will happen if that country suffers an economic slowdown or investors lose confidence in its markets. While some currencies fluctuate freely against each other, such as the Japanese yen and the US dollar others are pegged or linked. They may be pegged to the value of another currency such as the US dollar or the euro or to a basket or weighted average of currencies.
Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each a. Economic consequences of new accounting standards are said to be consistent with efficient markets for which of the following reasons? 1) 2) 3) 4) Because of the existence of securities markets anomalies Because there could be indirect cash flow effects of accounting standard changes Because accounting policy changes affect the amount of income tax payable Because accounting changes reflect a move from historical cost to fair value b.
a. Fisher b. Herstatt c. Unbiased forward rate d. International Fisher 4.5 The purchase of currency on one market for immediate resale in another market in order to profit from the rate discrepancy is known as _________. a. arbitrage b. financial innovation c. a line of credit d. countertrade 4.6 In its absolute version, _______ states that price levels should be equal world-wide when expressed in a common currency. a. interest rate parity b. purchasing power parity c. the international Fisher effect d. covered interest arbitrage 4.7 When there is a relative shortage of capital and high political risk in most developing countries, it is likely to drive real interest rates in these countries to a. decline below real interest rates in developed countries b. exceed nominal interest rates in developed countries
Information Technology: Information is the lifeblood of every nation’s capital market because investors need information about investment opportunities and their corresponding risk levels. Deregulation: Deregulation of national capital markets has been instrumental in the expansion of the international capital market. The need for deregulation became apparent in the early 1970s, when heavily regulated markets in the largest countries were facing fierce competition from less regulated markets in smaller nations. Financial Instruments: Greater competition in the financial industry is creating the need to develop innovative financial instruments. One result of the need for new types of financial instruments is securitization.
Quantitative easing is considered an unconventional policy tool which has been widely employed by Central Banks across the world during the recent crisis, not without controversy. Discuss the costs and benefits of such a policy tool. QE is the government's attempt to stimulate growth by essentially printing money. When interest rates are cut so low that they cannot be cut any further and growth is still sluggish then the only option for central banks seems to be QE. Central banks thus pump money directly into the economy by buying assets, normally government bonds that belong to certain institutions such as commercial banks.
FedEx faces problems when there are severe inflations or hike in exchange rates. Since FedEx trades with countries worldwide, interest rates and exchange rates vary in every country. When the purchasing power of its potential consumers is lowered, it affects the organization negatively and vice versa. An incline in a country’s economy results in an increase in the use of services of an organization. With a worldwide network in many
The unique feature of International Trade is that buyers and sellers reside in different countries. This residency difference of International Trade, however, leads to a couple of considerations. * First, because different nations use different domestic currencies, International Trade inevitably involves an exchange of currencies. Currency exchange, which takes places through the foreign exchange market, is central to the study of international finance. * Second, because different nations are ruled by different governments, which are inclined to look after their different national interests, International Trade inevitably involves government trade policies.
Without international trade countries would have to depend solely on products and services that are produced solely in their own country. As a result the country would lose out on revenue that comes from the trading. In recent times we are seeing countries with strong international trade gaining the ability to control the world economy, we will see in this essay that countries who seek to reduce the levels of poverty will look to developing their international trade. In this essay we will look at some of the economic institutions which help in developing less developed countries international trade. We will look at how international trade can benefit countries, focusing developing
3. Discuss current trends in the economic environment of which marketers must be Aware and provide examples of companies’ responses to each trend. The economic environment consists of factors that affect consumer purchasing power and spending patterns. Marketers must pay close attention to major trends and consumer spending patterns both across and within their world markets Some current economic factors include the recent recession, interest rates, the housing crisis, fuel costs, and the weak dollar against most world currencies. For example, a weak U.S. dollar is a threat for Americans purchasing imported goods or traveling abroad, but it is an opportunity for American companies exporting products to other countries as well as for the