Question: 3. Understand the rule on what determines the expected future spot exchange rate between two countries based on todays interest (or inflation) rates between two

3. Understand the rule on what determines the expected future spot exchange rate between two countries based on todays interest (or inflation) rates between two countries. How well does this rule (i.e., interest rate parity) work in practice? Know the most common way a firms international future account receivables (or payables) could be protected from exchange rate changes before the funds in these accounts are actually received (or paid).

4. Know why momentum seems to work when trying to forecast the future spot exchange rate using the forward exchange rate market. What is a banker's acceptance? How does it facilitate international trade by solving the "problem" of an exporter wanting to get paid before it exports goods and the importer wanting to receive the goods before paying for them?

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