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1、Multinational Financial Management（跨国公司财务管理）ch02 Understanding Exchange RatesPart I.Understanding Exchange RatesI.SETTING THE EQUILIBRIUM A.The exchange rateis the price of one unit of foreign currency expressed as a certain price in local currency.For example$.99/means the euro in the U.S.is worth$
2、.99.Understanding Exchange RatesB.How Do Americans Purchase German Goods?1.Foreign Currency Demand:-derived from the demand for foreign countrys goods,services,and financial assets.e.g.Americans demand German goods such as Mercedes autosThe Demand for in the U.S.Qty$1.10/$/DAt higher exchange rates,
3、Americans demand less euros and vice versa.$1.20/$1.00/Understanding Exchange Rates2.Foreign Currency Supply:-derived from the foreign countrys demand for local goods.-Foreign buyers must convert their currency in order to purchase.e.g.German demand for US goods such as Dell computers means Germans
4、must convert eurosto US$in order to buy.The$/Equilibrium RateQty$1.10S$/DEquilibriumUnderstanding Exchange RatesC.How Exchange Rates Change1.Increased demandas more foreign goods are demanded,more of the foreign currency is demand at each possible exchange rate2.The price of the foreign currency in
5、local currency increases.Understanding Exchange Rates3.Home Currency Depreciation a.Foreign currency more valuable than the home currency.b.Conversely,the foreign currencys value has appreciated against the home currency.The US$Depreciates WhenQty$1.10/S$/DD$1.20/Q1Q2Understanding Exchange RatesD.Co
6、mputing a Currency Appreciation=(e1 -e0)/e0where e0 =old currency value e1=new currency valueUnderstanding Exchange RatesEXAMPLE:AppreciationIf the dollar value of the goes from$1.10(e0)to$1.20(e1),then the has appreciated by(1.20-1.10)/1.10=9.1%Understanding Exchange RatesC.4.Calculating a Deprecia
7、tion:=(e0 -e1)/e1where e0=old currency value e1=new currency valueUnderstanding Exchange RatesEXAMPLE:US$DepreciationUse the formula(e0 -e1)/e1substituting(1.10 1.20)/1.20=-8.3%is the US$depreciation.Understanding Exchange RatesD.FACTORS AFFECTING EXCHANGE RATES:1.Inflation rates2.Interest rates3.GNP growth ratesSample ProblemSuppose the U.S.dollar appreciates against the Russian ruble by 500%.How much did the ruble depreciate against the dollar?Sample ProblemDepreciation of the ruble:Sample Problem