Exchange rates
In this lesson, you'll learn how exchange rates work in international investment and financing decisions—a key area tested in AFM.
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In this lesson
- 0:00 Lesson 11: International investment and financing decisions
- 0:26 Exchange rates in international decision making
- 1:36 Four-way equivalence and parity theories
- 3:03 Purchasing power parity formula explained
- 3:43 Interest rate parity theory and forward rates
- 4:18 Cross rates: converting multiple currencies
- 5:28 Cross rate calculation worked example
About this lesson
You'll discover how to calculate spot and forward rates using interest rate parity and purchasing power parity theory, and how to work with cross rates when dealing with multiple currencies. These techniques are essential for evaluating overseas projects, managing foreign currency risk, and making sound financing decisions across borders. By the end, you'll be confident converting between currencies and understanding the relationships between interest rates, inflation, and exchange rate movements.
Duration: 7m
Transcript
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