【正文】 11) NPV Any financial decision can be looked upon as a determination of whether what is put in today (. purchase price of a stock, amount of loan applied for or initial outlay of a project) is greater or smaller than what is received back (. discounted value of futu。s) value, before they are summed. Discounting is part of the study of time value of money, or actuarial mathematics, and a plete treatment of it can be found in specialized textbook.4) time value of moneyTime value of money studies how amounts of money are made equivalent over time. Converting amounts today into their future equivalent consists in adding interest to principal, . pounding. Converting amounts in the future into today39。s wealth and tastes, the level of domestic and foreign interest rates, expectations of future inflation, interest rates, and so on. Any significant change in the underlying factors will cause the holder to adjust his portfolio and seek a new equilibrium. These actions to balance portfolios will influence exchange rates.4. Discussions1） How does the purchasing power parity work?2） Describe and discuss one model for forecasting foreign exchange rates.3） Make mends on how good are the various approaches mentioned in the chapter.4） Central banks occasionally intervene in foreign exchange markets. Discuss the purpose of such intervention. How effective is intervention?Chapter 12 The Financial Markets 金融市場1. Key Terms 1）money market The money market is really a market for shortterm credit, or the option to use someone else39。 that there are no transportation costs, information gaps, taxes, tariffs, or restrictions of trade。s monetary authorities, and that the demand for money has a stable and predictable linkage to a few key variables, including an inverse relationship to the interest rate—that is, the higher the interest rate, the smaller the demand for money. 5) portfolio balance approachThe portfolio balance approach takes a shorterterm view of exchange rates and broadens the focus from the demand and supply conditions for money to take account of the demand and supply conditions for other financial assets as well. Unlike the monetary approach, the portfolio balance approach assumes that domestic and foreign bonds are not perfect substitutes. According to the portfolio balance theory in its simplest form, firms and individuals balance their portfolios among domestic money, domestic bonds, and foreign currency bonds, and they modify their portfolios as conditions change. It is the process of equilibrating the total demand for, and supply of, financial assets in each country that determines the exchange rate.2. True or False 1) true 2) true3. Cloze1）PPP is based in part on some unrealistic assumptions: that goods are identical。 overall price levels.3) FEER “fundamental equilibrium exchange rate,” or FEER, envisaged as the equilibrium exchange rate that would reconcile a nation39。 and if the base currency earns a lower interest rate than the terms currency, the base currency will trade at a forward premium, or above the spot rate. Whichever side of the transaction the trader is on, the trader won39。 the role it plays in investment , trade, etc.2) What kind of market is the foreign exchange market?Make reference to the following parts:（ The Market Is Made Up of An International Network of Dealers）Chapter 9 Instruments 交易工具1. Key Terms 1) spot transaction A spot transaction is a straightforward (or “outright”) exchange of one currency for another. The spot rate is the current market price, the benchmark price.Spot transactions do not require immediate settlement, or payment “on the spot.” By convention, the settlement date, or “value date,” is the second business day after the “deal date” (or “trade date”) on which the transaction is agreed to by the two traders. The twoday period provides ample time for the two parties to confirm the agreement and arrange the clearing and necessary debiting and crediting of bank accounts in various international locations.2) American terms The phrase “American terms” means a direct quote from the point of view of someone located in the United States. For the dollar, that means that the rate is quoted in variable amounts of . dollars and cents per one unit of foreign currency (., $ per Euro).3) outright forward transactionAn outright forward transaction, like a spot transaction, is a straightforward single purchase/ sale of one currency for another. The only difference is that spot is settled, or delivered, on a value date no later than two business days after the deal date, while outright forward is settled on any preagreed date three or more business days after the deal date. Dealers use the term “outright forward” to make clear that it is a single purchase or sale on a future date, and not part of an “FX swap”.4) FX swap An FX swap has two separate legs settling on two different value dates, even though it is arranged as a single transaction and is recorded in the turnover statistics as a single transaction. The two counterparties agree to exchange two currencies at a particular rate on one date (the “near date”) and to reverse payments, almost always at a different rate, on a specified subsequent date (the “far date”). Effectively, it is a spot transaction and an outright forward transaction going in opposite directions, or else two outright forwards with different settlement dates, and going in opposite directions. If both dates are less than one month from the deal date, it is a “shortdated swap”。s most widely traded currency?key points: economic background。 London39。.. . . ..International Finance 國際金融Notes to the answers:All the terms can be found in the text.The discussions can be attained by reading the original text.Chapter 1Answers:II. T T F F F T TIII