Ben HickmanFIN480AtkinsT/Th 2:20pmChapter 6 Homework 1. The foreign exchange market is a physical and institutional structure through which the money of one country is exchanged for that of another country, the rate of exchange between currencies is determined, and foreign exchange transactions are physically completed between the two countries. Foreign exchange transactions are is an agreement between a buyer and seller that a fixed amount of one currency will be delivered for some other currency at a specified rate.Foreign exchange means the money of a foreign country; that is, foreign currency bank balances, bank notes, checks, and drafts.3. Foreign exchange dealers- Buy and sell foreign exchange in the wholesale market and resell or re-buy it from customers at a slight change from the wholesale price.Foreign exchange brokers- Act as intermediaries in bringing dealers together to make a profit.Individuals and firms- Are looking export and import with other countries to grow their company4. A spot transaction is an agreement between two parties to exchange one currency for another. The transaction being carried out between the two parties at once for commercial customers and on the second following business day for most banks. This is the quickest transactionA forward transaction is an agreement made today to exchange one currency for another, with the date of the exchange being a specified time in the future. A swap trade is when two parties agree to buy and sell at two points in time in the future. An example is to have the first transaction in 3 months and then another one in 9 months. 5. a. 1. Swaps 2. Spot. 3.Forwardb. 1. UK 2. US 3. Japan 4. Singapore 5. Germanyc. 1. US Dollar 2. Euro 3. Deutschmark6. A bid quote is the price in one currency at which a dealer will buy another currency. An ask price is the price at which a dealer will sell the other currencies. These prices are set and non-negotiable 7. a. Euro: €1.02/$ (indirect quote) 1/1.02 = $0.98/Euro (direct) b. Russia: Rub 30/$ (indirect quote) 1/30 = $0.0333/Rub (direct) c. Canada: $0.63/C (direct quote) 1/0.63 = C$.5873/$ (indirect) d. Denmark: $0.1300/Dkr (direct quote) 1/0.1300 = Dkr 7.6923/$ (indirect)9. American terms are used for quoting rates for most countries currency options and futures. The Euro terms have some kind of expectations to that rule other than the U.K Sterling. 10. Direct quotes are a home currency price of a unit of exchange foreign currency. Example: $.03120/1 PesoIndirect Quotes are foreign currency price of unit of home currency. Example:19.12 Yen/1