Foreign Exchange rates prior knowledgere

Foreign Exchange Rate

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1. What is foreign exchange rate ?

2. How is it determined ?

3. What does depreciation and appreciation of Forex rates actually mean ?

Multiple Choice

Foreign exchange rates can be defined as....

• A foreign currency exchange rate is a price that represents how much it costs to buy the currency of one country using the currency of another country.

• Foreign exchange is the amount of foreign currencies a country has with it.

• Foreign exchange rate is the interest rate at which loans are given by IMF to its member countries

Multiple Choice

Which of the following factors may effect the foreign exchange rates of a country ?

• Domestic and international Interest rates

• Inflation rates

• Political stability

• All of the above

Multiple Choice

Option 1: 1 US dollar = Rs. 40

Option 2: 1 US dollars = Rs. 20

• Option 1 to 2 is depreciation

• Option 2 to 1 is depreciation