logo image

International Financial Markets

Describe the background and corporate use of the following international financial markets: Foreign exchange market International money market International credit market International bond market International stock markets Foreign Exchange Market; A worldwide decentralized market for trading currencies which determines relative values of foreign currencies. ; Assist international trade, investments, foreign traveling. ; Foreign exchange dealers acts as intermediaries.

Spot Rate & its features; Rate at which one currency is traded for another is spot rate. SUDS is the most commonly accepted currency especially in the countries with weak currencies. ; Spot market liquidity Spot Market Structure; Company ‘A’ purchases supplies on first day of every month priced at 100,000 Euros from Company ‘B’. Chi 3 International Financial Markets 1 By pm month ago, Euro was worth $1. 08. ‘A’ needed $108,000 (Euro to pay. Sank transferred money to ‘B’. ; Today new payment is due.

Euro is valued at $1. 12. Company ‘A’ needs $112,000 (Euro $1. 2) to make payment to ‘B’. Time Zones & Spot Market Attributes of Banks Providing Foreign Exchange Offer cash management services for the clients. ; May provide assessment of foreign economies. ; Provide forecast of future value of exchange rates. Foreign Exchange Quotations ; Bid-Ask

Need essay sample on "International Financial Markets"? We will write a custom essay sample specifically for you for only $ 13.90/page

Spread: Commercial banks charge a fee for conducting foreign exchange transaction. Ask rate – Bid rate ; Bid-Ask Spread % Ask rate – Bid rate Ask rate – Spread is higher for illiquid currency that are not traded frequently as compared to the liquid currencies.

X 100 Exercise ; Utah Banks bid price for Canadian dollar is $0. 7938 and its ask price is $0. 81. What is the bid/ask percentage spread? Compute the bid/ask percentage spread for Mexican Peso retail transaction in which the ask rate is $. 11 and the bid rate is $. 10. Solution ; ($. 81 – $. 7938)/$. 81 = . 02 or ; [($. 11 – $. 10)/$. 11] = . 091, or 9. 1%.

Interpreting Foreign Exchange Quotations ; Ever-changing value of exchange rates throughout the day leads to direct and indirect quotations at a point of time. ; No. Of dollars per currency 1 = $1. 0 ; Indirect Quotations ; No. Of units of currency per dollar (Reciprocal of Direct Quotation) 1 / 1. 20 Example ; If spot rate of Euro is US $1. 031 Direct Quotation 1 = $1. 031 ; Indirect Quotation = 1/ Direct Quotation = 1/ $1. 031 0. 97=$1 Cross Exchange Rate ; It is the exchange of two non US dollar currencies. Tourist at the airport who is from Mexico and is on his way to Canada.

He is willing to buy your C$200 for 1 ,300 pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain. Calculate ; Today you notice the following exchange rate quotations: ; $1 is equal to 3. 00 Argentine pesos ; 1 Argentine peso = 0. 50 Canadian dollars ; You need to purchase 100,000 Canadian dollars with U. S. Dollars. How many U. S. Dollars will you deed for your purchase? International Credit Market ; Sometimes, Macs obtain medium-term funds. ; Funds are obtained through term loans from local financial institutions. Funds may be obtained through the issuance of notes in their local markets. ; NC may obtain funds through banks located in foreign markets.

Reoccurred Market ; Euro credit loans:

– Loans of one year or longer extended by banks to Macs/Gobo. Agencies in Europe are called Euro credit loans.

– Loans are denominated in dollars or other currencies with maturity of 5 years.

– The market dealing with Euro credit loans is called Floating Rate Loans:

London Interbrain Offer Rate (LABOR) with premium up to 3% depending upon credit worthiness of borrower. LABOR is the rate commonly charged for loans between banks. Http://Labor Syndicated Loans ; When banks are unwilling/unable to process a huge loan they form groups know as syndicates. ; Lead bank negotiate terms with borrowers. ; Underwriting fee is paid by borrower. ; Commitment fee of 0. 25% or 0. 50% P. A. Is paid for unused portion of the available credit. ; Interest rates are determined by:

– Credit worthiness of borrower

– Maturity period Currency denominating the loan.

Read about disadvantages of Single Currency

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!
×
Sorry, but copying text is forbidden on this website. If you need this or any other sample, please register

Already on Businessays? Login here

No, thanks. I prefer suffering on my own
Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.
Sign in / Sign up
No, thanks. I prefer suffering on my own
Not quite the topic you need?
We would be happy to write it
Join and witness the magic
Service Open At All Times
|
Complete Buyer Protection
|
Plagiarism-Free Writing

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy