NUST Business School

International Financial Management

Assignment # 03

Submitted To:

Mr. Muhammad Arshad

Submitted By:

Mohsin Sarfraz

EMBA-2K16

Date: 17 April, 2019.

Exchange Rate:
An exchange rate is the value of one nation's currency versus the currency of
another nation or economic zone.

Direct Quote:
A quote, which is expressed as Rupees per unit of a foreign currency is referred to
as a Direct Quote.

Indirect Quote:
A quote, which is expressed as foreign currency per unit of Rupee or per Rs. 100 is
referred to as an Indirect Quote

Direct Quote = 1/ Indirect Quote

Cross Exchange Rate:

A cross rate is an exchange rate of two currencies expressed in a third different
currency, such as the exchange rate between the euro and the yuan expressed
in yen.

Currency Appreciation:
Currency appreciation is an increase in the value of country’s currency with respect
to one or more foreign currencies, typically in a floating exchange rate system in
which no official currency value is maintained.

Currency Depreciation:
Currency depreciation is the loss of value of a country's currency with respect to one
or more foreign reference currencies, typically in a floating exchange rate system in
which no official currency value is maintained.

Nominal Exchange Rate:

A nominal exchange rate is the rate at which you can exchange one currency for
another. Nominal rates are quoted in the paper and posted at the foreign exchange
kiosks.

Real Exchange Rate:

Real exchange rates provide an inflation adjusted measure of a currency’s
purchasing power. It is important to adjust for inflation because both inflation and
nominal exchange rate movements affect a firm’s cost position relative to
international rivals.