become a major component of our global economy. However‚ with over 200 countries and 180 currencies in the world‚ countries cannot trade with each other without a way to pay each other in their currency. Thus‚ in order to trade‚ countries have developed a formula to convert their money to that of another country’s. That formula is the exchange rate. The exchange rate is the rate at which a country’s currency can be exchanged for that of another country. For example‚ lets consider the Chinese Yuan
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I believe that China pegged the value of its currency‚ the yuan‚ to the U.S. dollar in 1994 because at that time the United States was the world ’s number economy and its currency is considered a highly reliable financial instrument. The benefits of pegging the value of the yuan against the dollar include more control in regulating money supply‚ and managing exchange rate. Costs include that higher chance of the economy blowing up in a costly currency collapse (Goldstein‚ 2002‚ p. 3)‚ an example
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Definition: The foreign exchange market can be defined as the collective activity of exchanging currencies i.e. where currencies are bought and sold. The price for the currency is known as the exchange rate. This is one unique market that is not located anywhere but exists on electronic platforms – telephones‚ telex‚ internet and other electronic gadgets. The reality of today is that most convertible currencies offer a 24-hour access for market participants. This unique feature has brought with it
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Until 1997‚ Asia attracted almost half of the total capital inflow into developing countries. The economies of Southeast Asia in particular maintained high interest rates attractive to foreign investors looking for a high rate of return. As a result the region’s economies received a large inflow of money and experienced a dramatic run-up in asset prices. At the same time‚ the regional economies of Thailand‚ Malaysia‚ Indonesia‚ Singapore‚ and South Korea experienced high growth rates‚ 8–12% GDP‚
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acquisition. She has to keep in mind Tirstrup has 30 million in cash‚ they earned 163 million from a sale and the priorities are not to issue additional equity of convertible shares. QUESTIONS Question 1: Which of the many debt characteristics – currency‚ maturity‚ cost‚ fixed versus floating rate – do you believe are of the highest priority for Julie and Tirstrup? According to the case study‚ Julie Harberj is assembling a proposal pertaining to the financing requirements for the acquisition of
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devaluation of the national currency‚ the rupee. And the rupee’s performance has been much in the news in recent weeks. Reference currency The value of a currency is its purchasing power – that is‚ what you can get for a unit of the currency in terms of goods and services. In today’s context when it is said that a currency is declining or being devalued‚ it is with respect to other currencies. Therefore‚ when speaking of the prevailing value of a currency‚ we use a reference currency and state whether the
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Mundell -Fleming Model The Mundell–Fleming model‚ also known as the IS-LM-BP model‚ is an economic model first set forth (independently) by Robert Mundell and Marcus Fleming The model is an extension of the IS-LM model. Whereas the traditional IS-LM Model deals with a closed economy‚ the Mundell–Fleming model describes an open economy. The Mundell-Fleming model portrays the short-run relationship between an economy’s nominal exchange rate‚ interest rate‚ and output (in contrast to the closed-economy
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department mainly deals with foreign currencies. Hence it is called foreign exchange department. The department brides with the export‚ import and foreign remittance. Following flow chart depicts the multifarious functions usually done by the FED. Chart: multifarious functions usually done by the FED 4.2 FOREIGN REMITTENCE The transfer of any funds across national boundaries. Foreign remittance means purchase and sale of freely convertible foreign currencies as admissible under Exchange Control
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B) illiquid; insensitive C) illiquid; highly sensitive D) none of these ANSWER: C 3. _______ is not a factor that causes currency supply and demand schedules to change. A) Relative inflation rates B) Relative interest rates C) Relative income levels D) Expectations E) All of these are factors that cause currency supply and demand schedules to change. ANSWER: E 4. A large increase in the income level in Mexico along with no growth in the U.S. income
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the central bank 13. Engaging in financial business operations in line with relevant rules 14. Performing other functions prescribed by the State Council. China’s Currency Manipulation After China allows the Yuan to float more freely‚ it has adopted a “managed float" policy. The Bank of China was able to manipulate its currency by buying dollars to keep the dollar price high. China has been interested in keeping the Yuan undervalued relative to the US Dollar‚ and the easiest way to keep the Dollar
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