Author: m***a
Date:
Review: True to product images: USD/MXN= 18.50 (1 USD costs 18.50MXN) - If USD/MXN rises, USD becomes more expensive in MXN terms. - For a Mexican USD receivable, this is favorable. - For a mexican USD payable or USD debts, this is unfavorable. - Always connect the quote to the currency side. Nominal Rate The observed market exchange rate. It determines the MXN value of a known foreign-currency cash flow. Real Rate The nominal rate adjusted for relative price levels. It is more useful for competitiveness and economic exposure. R= Nominal* (Pforeign/Pdomestic) If q rises > domestic real depreciation Managerial Rule - Use nominal rates for transaction exposure; use real rates for competitiveness diagnosis. PPP Core Idea: currencies should adjust so that comparable baskets of goods have similar prices across countries when expressed in a common currency. Usefulness: PPP provides a long-run anchor for evaluating whether market exchange rates are strong or weak relative
Color: Black
Size: S
