Multinational financial management chapter 2

How an exchange rate is and how it is determined in the absence of government intervention

Refers to a decrease in the stated par value of a pegged currency

One whose value is set by the government

An increase in par value

One who’s baliw is that primarily by market forces

The price of one nation’s currency in terms of another currency

The price at which currencies are traded for immediate delivery actual delivery takes place two days later

The price at which foreign exchange is quoted for delivery at a specified future date

The price at which both the supply and demand for one currency in terms of another are just equal

Equals the nominal or actual interest rate minus the rate of inflation

The Nations official monetary authority job is to use the instruments of monetary policy including the sole power to create money achieved one or more of the following objective price stability low interest rates or a target currency value

Non convertible paper money

Financing the public sector deficit by buying government debt with newly created money

The complete replacement of the local currency with the US dollar

The central bank’s profit on the currency it prints

Measured as the nominal or actual exchange rate adjusted for changes in relative price levels

Refers to official purchases and sales of foreign exchange that nations undertake through their central banks to influence their currencies

The monetary authorities have not insulated their domestic money supplies from the foreign exchange transaction

Just the sale or purchase of Treasury securities

Currency in circulation plus bank reserves