# Foreign Currency Management

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```					Foreign Currency
Management
Exchange Rate
This is the rate at which the currency of one
country would change hands with currency of
another country.
E.g. \$1 = SLR 130

Types of Exchange Rate
1. Floating Rate
This rate depends on a levels of the
international trade of a country and it does
not interfere with the government of that
country.
2. Fixed Rate
This is the rate that the government of the
country would set its own currency rate and it
is not depending on the market rate.
3. Dirty Float
This is the rate that mixed between floating
rate and fixed rate system. This is where the
government would allow exchange rate to
float between a particular two limits. If it goes
outside either of the limit, then the
government would take further action.
Forex Dealings
1. Bid Price
The price at which the currency is bought
by the dealer.
2. Offer Price
The price at which the currency is sold by
the dealer.
 When regarding the forex dealings,
Offer Price > Bid Price
Example 01:
David is a UK businessman. He needs \$ 400,000
Identify the amount of f required to buy the
Dollars? (\$/ f 1.75 - 1.77)
The amount of f required = \$ 400,000
\$/f 1.75
= f 228571.43
Example 02:
a payment of f 150,000 from his main customer
in UK.
Identify the amount of \$ received by James
when f 150,000 are given? (f /\$ 0.61 – 0.63)
The amount of \$ received = f 150,000
f /\$ 0.63
= \$ 238095.24
Spot Rate and Forward Rate
Spot Rate
This is the rate which is applicable for the
immediate delivery of currency as at now.

Forward Rate
This is a rate that set for the future
transaction for a fixed amount of currency.
The transaction would take place on the
future date at this agreed rate by disregarding
the market rate.

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 views: 170 posted: 7/31/2012 language: English pages: 24
Description: This presentation describes the Foreign Currency Management theories & its related applications for undergraduates or lecturers who are in the management or finance field.
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