foreign exchange risk management

$2:£ or 2 $/£ or 2$ = £ means that ___ equals ____ .

• $2, £1

• £2, $1

$2:£ means that ___ is the counter currency and ____ is the base currency.

• $, £

• £, $

Generally, the _____ country is the base currency and the _______ country is the counter currency.

• Home, Foreign

• Foreign, Home

Banks buy the counter currency ____ and sell it ____ .

• High, Low

• Low, High

If we are a UK cy and we are making a payment in $, but we don't have $, so the UK bank will sell me the counter currency ($).

And they will sell it to me at the ____ rate.

• Low

• High

If we are a UK cy and will receive $. The UK bank will buy counter currency ($) from me at ____ rate.

• High

• Low

Translating Currencies:

If you are given the counter currency:

_____ the amount by the exchange rate

• Divide

• Multiply

A UK company has to pay $1,500. Spot rate is £ : $1.5.

How much is it in £?

• £2,250

• £1,000

A UK company has to pay £1,000 in $. Spot rate £ : $1.5.

How much is it in $?

• $1,500

• $ 667

If we are a UK cy and we are making a payment $100, but we don't have $, so the UK bank will sell me the counter currency ($).

Spot rate: £: $2+-0.1 …. (= £: $1.9 - $2.1)

How much it will be in £?

• £52.63

• £47.6