Key to  the Exercises 

教学课件：习题解析

II Define briefly the following terms and concepts.

1. Foreign exchange, or forex, is foreign money. All foreign currency, consisting of funds held with banks abroad, or bills or cheques, again in foreign currency and payable abroad, are termed foreign exchange.

2. A fixed exchange-rate system (also known as pegged exchange rate system) is a currency system in which governments try to keep the value of their currencies constant against one another.

3. A floating exchange rate or a flexible exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market.

4. Spot transactions involve today’s prices of currency and delivery of the currency within two business days.

5. Forward transaction refers to that a buyer and seller agree on a price for any date in the future and the transaction occurs on that date, regardless of what the market rates are then. The date can be a few days, months or years in the future.

6. Interest rate parity is an non-arbitrage condition which says that the returns from borrowing in one currency, exchanging that currency for another currency and investing in interest-bearing instruments of the second currency, while simultaneously purchasing futures contracts to convert the currency back at the end of the investment period, should be equal to the returns from purchasing and holding similar interest-bearing instruments of the first currency. If the returns are different, investors could theoretically arbitrage and make risk-free returns.

III Translate the following sentences into Chinese.

1. 汇率报价按1个单位货币（也被称为基准货币）可以买到的若干数量的计价货币或报价货币表示。

2. 银行同业市场内，买卖价之间的点差非常小并且不被业内以外的交易者知悉。

3. 汇率波动会实际提高或降低价格，对于公司和个人来说，可能是对财务计划的一次严峻考验。

4. 购买力平价理论基于使两国货币购买力相等的长期均衡汇率。

5. 与购买力平价理论相似，国际收支模型主要强调贸易商品和劳务，忽视了国际资本流动日益重要的作用。

IV Translate the following sentences into English.

1. The exchange rate is a price—the price of one national currency in terms of another—and is determined by supply and demand.

2. The demand for dollars in the foreign exchange market reflects the demand by foreign residents for U.S. goods, services, and financial claims.

3. The supply of dollars comes from the demand by U.S. residents for foreign goods, services, and financial claims.

4. A depreciation of the dollar can result from one or more of the following: a fall in U.S. interest rates relative to foreign interest rates, a rise in U.S. income, a fall in foreign income, and/or  more inflation in the United States than abroad.

5. The purchasing power parity theory is based on the assumption that goods are identical and tradable, and that there are no transaction costs or barriers to trade.