International Business Management · Unit 6 · 8 hrs
International Financial Environment
Exam-focused notes for International Financial Environment (International Business Management, MGT488): what the TU syllabus asks and how it has actually been tested, with 6 solved past questions from this unit.
What this unit covers
- Foreign exchange markets
- Spot market
- Spot rate quotations
- Bid-ask spreads
- Trading in spot markets
- Cross exchange rates
- Forward markets
- Forward rate
- Long and short forward positions
- Forwards premium and discount
- Arbitrage, Hedging and Speculation
- Types of exchange rate systems: fixed and floating, soft peg, crawling peg, free float, managed float
- Factors affecting exchange rate: relative inflation rates, interest rates, relative interest rates, relative income levels, government controls, expectations
- Mode of payment in international trade
Spot market
Discuss the spot market and cross exchange rate as instruments of foreign exchange. [5]
The spot market is a financial market in which currencies are bought and sold for immediate delivery and payment at the current prevailing price. It is also referred to as the physical market because cash payments are processed immediately at the time of th...
Full solved answer →Mode of payment in international trade
Point out the modes of payment in international trade. [5]
In international trade, several modes of payment are used to facilitate the exchange of goods and services between parties in different countries. The choice of payment method depends on the level of trust between buyer and seller, the nature of the transac...
Full solved answer →Explain the mode of payment in international trade. [5]
In international trade, several modes of payment are used to facilitate the exchange of goods and services between parties in different countries. The choice of payment method depends on the level of trust between buyer and seller, the nature of the transac...
Full solved answer →Foreign exchange markets
State the meaning of foreign exchange market. Mention the factors affecting foreign exchange rate.[10]
--- The foreign exchange market (also known as the forex market or FX market) is a global, decentralized marketplace where currencies of different countries are bought and sold. It is the mechanism through which one country's currency is converted into anot...
Full solved answer →Types of exchange rate systems
Mention in brief, the types of exchange rate system. [5]
Exchange rate systems refer to the mechanisms by which a country's currency is valued in relation to other currencies. There are three broad categories of exchange rate systems, described below: --- A fixed exchange rate is a rate that the government (centr...
Full solved answer →Factors affecting exchange rate
Describe any two factors affecting exchange rate. [5]
An exchange rate is the rate at which one currency is exchanged for another currency. It affects trade and the movement of money between countries. Several factors influence the determination and fluctuation of exchange rates. --- Inflation refers to the ge...
Full solved answer →Make Unit 6 stick
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