1. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. CHAPTER 12 Basics of Foreign Exchange Markets

2. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Source: McDonald’s Bogota´, Colombia, the above information was accessed at http://www.mcdonalds. com.co/promocion.php on January 19, 2006; this URL may no longer be active or may now include revised information. Similar offers can be found at: http://www.mcdonalds.com.co/novedades.html. Special! Get a Big Mac, Fries, and the Beverage of Your Choice for Only $7,200

3. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-1 Correct Alignment of Exchange Rate and Price

4. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-2 Incorrect Alignment of Exchange Rate and Price

5. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-3 Foreign Exchange Quotations

6. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-4 Bid-Ask Quotes for Dollar per Ringgit and Ringgits per Dollar

7. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-5 Global Foreign Exchange Market Turnover* Source: Bank for International Settlements, Monetary and Economic Department, Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2004: Preliminary Global Results, September 2004, Table 1, p. 9. See http://www.bis.org/publ/rpfx04.pdf (accessed October 13, 2006).

8. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-6 Currency Distribution of Reported Foreign Exchange Market Turnover Source: Bank for International Settlements, Monetary and Economic Department, Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2004: Preliminary Global Results, September 2004, Table 3, p. 11. See http://www.bis.org/publ/rpfx04.pdf (accessed October 13, 2006).

9. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-7 The Foreign Exchange Market

10. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-8 Checking Accounts Never Leave the Country

11. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit M12-1 Balance Sheet Changes in U.S. and U.K. Banks Due to the Creation of a Eurodollar Deposit

12. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-9 Foreign Exchange Quotes for Wednesday, January 18, 2006, and Thursday, January 19, 2006, from the January 20, 2006, edition of The Wall Street Journal

13. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-9 Continued Source: International Monetary Fund. a—Russian Central Bank rate, b—Government rate, d—Rebased as of Jan. 1, 2005. y—Floating rate

14. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-10 Swiss Franc–U.S. Dollar Spot and Forward Rates

15. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-11 Japanese Yen–U.S. Dollar Spot and Forward Rates

16. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-12 U.K. Pound–U.S. Dollar Spot and Forward Rates

17. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 12-13 Swiss Franc–U.S. Dollar Spot and Forward Rates

18. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit A12-1 Differences between the Forward and Futures Markets

19. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit A12-2 Global Over-the-Counter Options Turnover Source: Bank for International Settlements, Monetary and Economic Department, Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2004: Preliminary Global Results, September 2004, Table 6, ‘‘Global OTC Derivatives Market Turnover by Instrument,’’ p. 14. See http://www.bis.org/publ/rpfx04.pdf (accessed October 13, 2006).