International Business And Finance

Front 1

Multinational Corporation

Back 1

A company with production and distribution facilitines in more than one country

Front 2

Classical theory

Back 2

international trade is the result of comparative advantage and has been spurred by changing global markets

Front 3

Balance of Payments

Back 3

meausres all financial and economic transactions over a specific time period

Front 4

Current account

Back 4

net flow of goods, services and unilateral transfers

Front 5

capital account

Back 5

transfers by migrants- foreign aid and debt forgiveness

Front 6

financial account

Back 6

net public and private investment and lending acitivies

Front 7

currency depreciation

Back 7

reducing the value of a currency increses the cost of foreign produced goods

Front 8

protectionism

Back 8

using tariffs and quotas increases costs of foreign produced goods

Front 9

IMF

Back 9

created to assist in implementing Bretton Woods and to promote international financial stibility

Front 10

Foreign Exchange Market

Back 10

facilitates the trade of one currency for another

Front 11

Organized exchange

Back 11

open out cry or auction

Front 12

over the counter

Back 12

no purchase location (NASDAQ)

Front 13

spot market

Back 13

currencies traded for immediate delivery

Front 14

forward market (future)

Back 14

contracts to buy or sell at some specified price in the future

Front 15

Swap markets

Back 15

combination of spot, forward positions

Front 16

foreign exchange brokers

Back 16

specialist in matching supplier and demander banks for a small commision whil providing anonymity

Front 17

American quote

Back 17

$/F.C

Front 18

European quote

Back 18

F.C/$

Front 19

Direct quote

Back 19

H.C/F.C

Front 20

Indirect quote

Back 20

F.C./H.C

Front 21

Bid Ask Spread

Back 21

differnce between the ask price and bid price

Front 22

future market

Back 22

highly standardized versions of forwards

Front 23

options market

Back 23

provide the buyer with the right to buy or sell a currency at a specified price within some time frame

Front 24

Call option

Back 24

the right to buy acurrency at a certain price

Front 25

put option

Back 25

the right to sell a currency at a certain price

Front 26

Eurodollar

Back 26

dollar denominated cash deposit outside the united states

Front 27

LIBOR

Back 27

base rate used with a premium added based on teh risk

Front 28

ADR

Back 28

American Depository receipy- gives the ability to foreign companies to sell shares of stock (ADS) in the U.S.

Front 29

Arbitrage

Back 29

taking advantage of a price difference between two or more markets

Front 30

free floating currency

Back 30

exchange rates are allowed to float, no government intervention

Front 31

pegged currency

Back 31

currency is tied to another currency

Front 32

revaluation/devaluation

Back 32

increasing/decreasing the balue of a pegged currency

Front 33

appreciation/depreciation

Back 33

an increase/decrease in value of a free floating currency

Front 34

Factors that influence foreign exchange rates

Back 34

inflation, real interest rates, economic growth, risk, caveat on interest rates, expectations, government controls, interaction of factors

Front 35

Inflation

Back 35

raises prices for goods and decreases deman for its currency

Front 36

Real interest rates

Back 36

increases demand for a currency as investor converts funds to incest overseas and obtain higher rates

Front 37

economic growth

Back 37

strong growth attracts investment captial and higher incomes

Front 38

risk

Back 38

political and economic risk decreases demand for a currecny; stability increases demand for a currency

Front 39

caveat on interest rates

Back 39

a relatively high interest rate may acutally reflect expectations of relatively high inflation, which discrourages foreign investment.

Front 40

Calculating appreciation/depreciation

Back 40

S1-S0/S0

Front 41

Calculating depreciation/appreciation

Back 41

S0-S1/S1

Front 42

exchange rate systems

Back 42

free float, managed float, target zone arrangement

Front 43

free float

Back 43

rates float based on changes in supply and demand from price level changes, interest rate dirrentials and economic growth

Front 44

managed float

Back 44

smooth daily fluctuations, unofficial pegging

Front 45

target zone arrangment

Back 45

contries adjust their national economic policies to maintain their exchange rates within a margin (Euro)

Front 46

fixed rate system

Back 46

each government maintains a target exchange rate range through market interventions when the currency deviates from its par value, each member must accept the same level of inflation, firms have no control over monetary policy, economic realities frequently lead to change

Front 47

Hybrid system

Back 47

the current international monetary system is a hybrid, with major currencies floating ona manged basis, some currencies free floating and other currencies moving in and out of some type of pegged exchange rate relationship

Front 48

3 objectives of the Central Bank

Back 48

price stability, set interest rates, maintain target currency value

Front 49

sterilized

Back 49

insulating money supply to actions (selling a currency and buying T-bills), 2 step

Front 50

unsterilized

Back 50

an open market intervention that impacts the money supply by simply buying or selling currencies without undertaking an open market operation, 1 step, only buy or sell $'s.

Front 51

Currency board

Back 51

bank replaced by a board that ties home currency to another's value, removes monetary pliciy control from governments hands. No setting interest rates when currency pegged.

Front 52

Dollarization

Back 52

replacing home currency for U.S. $