AFM335 International Financial Management

Added on -2020-02-18

| AFM335| 14 pages| 3499 words| 62 views

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Running head: INTERNATIONAL FINANCIAL MANAGEMENTInternational Financial ManagementName of the Student:Name of the University:Author’s Note:Course ID:
1INTERNATIONAL FINANCIAL MANAGEMENTTable of ContentsAnswer to Question 1:.....................................................................................................................2Answer to Part 1:.........................................................................................................................2Answer to Part 2:.........................................................................................................................2Answer to Part 3:.........................................................................................................................3Answer to Part 4:.........................................................................................................................3Answer to Question 2:.....................................................................................................................4Answer to Question 3:.....................................................................................................................4Answer to Part a:.........................................................................................................................4Answer to Part b:.........................................................................................................................5Answer to Question 4:.....................................................................................................................6Answer to Question 5:.....................................................................................................................8Answer to Question 6:.....................................................................................................................9Conclusion:....................................................................................................................................11References:....................................................................................................................................12
2INTERNATIONAL FINANCIAL MANAGEMENTAnswer to Question 1: Direct quote could be defined as the cross-border currency price in the units of domesticcurrency. In other words, it is the price of domestic currency in relation to a foreign currencyunit. The quote related to AUD/USD 1 is prevalent in Australia. Indirect quote, on the otherhand, is the domestic currency price in relation to units of foreign currency. In other words, itcould be defined as the price of foreign currency in relation to domestic currency unit. The quoterelated to USD/AUD 1 is inherent in Australia. Bid could be described as the amount, which adealer could afford to incur for a currency. On the other hand, ask could be identified as theamount, in which the dealer would ask for a currency. Answer to Part 1:It has been observed that the Australian dollars are quoted conventionally as well aspresently in American dollar terms, which could be denoted with the help of USD price for asingle AUD (Eiteman, Stonehill & Moffett, 2013). Hence, in the nation, the exchange rate ofAUD is depicted as AUD/USD. In relation to the use in Australia, it could be termed as indirectquote related to spot currency, since the cross-border currency is utilised as the component ofprice and the domestic currency is the rate base. In this case, the component of price is USD andthe domestic currency is AUD. Answer to Part 2:Since there is no presence of formal regulations regarding the direct or indirect depictionof a pair of currency, it would rely on the procedure that each nation utilises. However,maximum portion of the trades of currency utilises European terms in the form of reference, inwhich the base is USD and it is denoted by USD/EUR. The US is involved in using the European
3INTERNATIONAL FINANCIAL MANAGEMENTterm and most of the nations are involved in utilising this term. This type depicts the cross-border currency price of a single USD and it is denoted by USD/Other currency, in which thecross-border currency is the price and USD is the base. With this procedure, this could be termedas an indirect quote from the US perspective. Answer to Part 3:In order to answer this question, it is necessary to divide into two portions, the first ofwhich is splitting of domestic currency to Euro and the second is splitting of Euro into foreigncurrency. Each quote of exchange related to domestic currencies found in Europe is carried outon a domestic currency based on per Euro and it is denoted by Euro/Domestic currency. Forthose nations in Europe involved in using the Euro currency, it is a European term and hence,this could be viewed as a direct quote. At the time of exchanging EURO on the market of globalexchange, the utilisation of US term is made and it is denoted by EUR/USD. Hence, this couldbe adjudged as indirect quote in relation to Europe. Answer to Part 4:For decades, UK has utilised the non-decimal currency, which is Pound Sterling. Thisconsists of pence and shillings (Eiteman et al., 2013). Because of the complex nature associatedwith the pound make-up, which is not in decimal, UK has found it relatively easy in quoting itscurrency depicted in units of foreign currency each pound. In the early 1800’s, the British explorers had colonised Australia into distinct coloniesand after that, a federation has been formed formally in 1901 (Australian Government, 2015).During such point of time, there was absence of formal currency utilised or banks developed

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