HW 6: Chapter 29:Exchange Rates and International Capital Flows

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9 Terms

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exchange rate

the price of one currency expressed in terms of units of another currency

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Foreign direct investment (FDI)

refers to purchasing a firm (at least ten percent) in another country or starting up a new enterprise in a foreign country

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portfolio investment

involves a purely financial investment that does not entail any management responsibility

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hedge

which means using a financial transaction to protect yourself against a risk from one of your investments (in this case, currency risk from the contract)

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interbank market

These banks (and a few other firms), known as dealers, then trade the foreign exchange

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appreciating

strengthening

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depreciating

weakening

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