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30 Cards in this Set

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  • Back
Currency Exchange Markets
Electronic markets where banks and institutional traders buy and sell various currencies on behalf of businesses and other clients.
Currency Exchange Rate
Value of one currency relative to another currency.
Direct Quotation Method
Indicates the amount of a home country's currency necessary to purchase one unit of a foreign currency.
Indirect Quotation Method
Indicates the amount of a foreign currency necessary to purchase one unit of the home country's currency.
Spot Exchange Rate
Rate being quoted for current delivery of the currency.
Forward Exchange Rate
Rate for the purchase or sale of a currency where delivery will take place at future date.
Purchasing Power Parity (PPP)
Currency of a country with relatively higher inflation rate will depreciate relative to the currency of a country with a relatively lower inflation rate.
Interest Rate Parity (IRP)
Currency of a country with a relatively higher interest rate will depreciate relative to the currency a country with a relatively lower interest rate.
Political Risk
Actions by a sovereign nation to interrupt or change the value of cash flows accruing to foreign investors.
Economic Risk
Risk associated with possible slow or negative economic growth, as well as with the likelihood of variability.
Arbitrage
Buying commodities, securities, or bills of exchange in one market and immediately selling them in another to make a profit from price differences in the two markets.
Draft (bill of exchange)
An unconditional order for the payment of money from one person to another.
Sight Draft
Draft requiring immediate payment.
Time Draft
Draft that is payable at a specified future date.
Documentary Draft
Draft that is accompanied by an order bill of lading and other documents.
Order Bill of Lading
Document given by a transportation company that lists goods to be transported and terms of the shipping agreement.
Clean Draft
A draft that is not accompanied by any special documents.
Commercial Letter of Credit
Statement by a bank guaranteeing acceptance and payment of a draft up to a stated amount.
Trust Receipt
An instrument through which a bank retains title to goods until they are paid for.
Banker's Acceptance
A promise of future payment issued by a firm and guaranteed by a bank.
Export-Import Bank
Bank established to aid in financing and facilitating trade between the U.S. and other countries.
Traveler's Letter of Credit
Issued by a bank to banks in other countries authorizing them to cash checks or purchase drafts presented by the bearer.
Flexible Exchange Rates
A system in which international exchange rates are determined by supply and demand.
Balance of Payments
A summary of all economic transactions between one country and the rest of the world.
Balance of Trade
The net value of a country's exports of goods and services compared to its imports.
Merchandise Trade Balance
The net difference between a country's import and export of goods.
Current Account Balance
The flow of income into and out of the United States during a specified time period.
Capital Account Balance
Foreign government and private investment in the United States netted against similar U.S. investment in foreign countries.
Dirty Float
Intervention by central banks to control exchange rates in the foreign exchange market's flexible exchange system.
Special Drawing Rights (SDRs)
International reserve assets created by the International Monetary Fund that can be drawn upon by member nations.