1. Section IV
Payment Terms and Procedures

2. Exchange Rates and International Trade
Chapter 10
Exchange Rates
and International Trade

3. Exchange Rate
An exchange rate is the number of units of a given currency that can be purchased for one unit of another currency.

4. Reasons for the Existence of the Foreign Exchange Market
Foreign travel
Purchase of foreign stocks and bonds
Foreign investment and other receipts and payments in foreign currency
Reduction of currency fluctuations
Speculation

5. Major Factors that Determine Foreign Exchange Rates
Balance of payments
Interest rates
Growth in the money supply
Inflation
Confidence in the government

6. Protection Against Exchange
Rate Risks
Hedging in financial markets: spot and forward market hedge, swap, acceleration, and delay of payments, etc.
Guarantees and insurance coverage
Invoicing in one’s own currency
Invoicing in foreign currency