1

2

1-1-sBaØaNénTIpSarbþÚrR)ak; (Notion of Exchange Market):

1.      TIpSarbþÚrR)ak;breTs (Foreign Exchange

Market)³ The foreign exchange market is a market for converting the currency of one country into that of another country.

2.      GRtabþÚrR)ak; (Exchange Rate)³ Exchange rate is the price of one nation's currency in terms of another. (Relative prices of money), prices of one nation’s money in terms of another

nation’s money. ]ThrN_³ GRtabþÚrR)ak;én 1 $ = 4,000 ` bBa¢ak;famYyduløarGaemrikmantMél smmUl eTAnwg 4,000 erol rbs;RbeTskm<úCa.

1-TIpSarbþÚrR)ak;breTs (Foreign Exchange Market)³

3

3-RbvtþiénGRtabþÚrR)ak; (History of Exchange Rate)³•bTdæanénmas (The Gold Standard)³ bTdæanenHmanedImkMenItBIkareRbIR)as;kasEdleFIVBImasCameFüa)ayenAkñúgkaredaHdUr CaÉktaKNnI nig CakarrkSaTuktMél.•sarCatiénbTdæanénmas (Nature of the Gold standard)³ karécñrUbiyb½NÑeTAtammas nig karFanalTæPaBbþÚr)an RtUv)aneKsÁal; fa bTdæanénmas (The Gold Standard). ]TahrN_³ enAGaemrik (23.22 grains of "fine"(pure) gold) sMrab;R)ak; 1 duløar ehIy mas 1 eGans_ mancMnYn 480 RKab;. (an ounce = 1/16 pound = 28.35 grams) dUecñHrdæaPi)al)ankMnt;fa masTMgn; mYyeGans_mantMél 20.67 $ (480/23.22) . cMEnkenA Gg;eKøs R)ak; 1 epan mancMnYn 113 RKab;. enaH ¬GRtabþÚrR)ak;¦RtUv)anTajy:aggayKW $ 20.67 / £ 4.25 b¤ mann½yfa 1 £ = 4.87 $.

4

 PaBxøaMgénbTdæanénmas (The

strength of the Gold standard)³ PaBxøaMgd_Gs©arüsMrab;bTdæanénmas KWfa vapÞúknUvynþkarmYyd_manGMnacsMrab; karsMerc)ansmtaénCBa¢IgBaNiC¢kmµedayRKb;RbeTsTaMgGs;.

 RbBn½æRbWtunvUd (The Bretton

Woods System)³

taMgBITsvtSr_qñaM 1870 rhUtdl;karcab;epþImsRgÁamelakelIkTI1 enAkñúgqñaM 1914 bTdæanénmasRtUv)aneKe)aHbg;ecal.

bTdæanénmasRtUv)anrlt;eTAvijmþgeTot enAeBlEdlmansRgÁamelakelITIBIr. eRkaysRgÁamelakelIkTIBIr enAqñaM 1944 manGñktMNagRbeTscMnYn 44 )anCYbKña enAkñúgTIRkug Bretton

Woods enA New Hampshire kic©RBmeRBogenA Bretton

Woods )anQandl;karbegáItRKwHsßancMruHCatiBIr KW mUlniFirUbiyvtßúGnþrCati (IMF) nig FnaKar BiPBelak (WB). edIm,Isþaresdækic©BiPBelakeLIgvij.

5

1-2-RbBnæ½GRtabþÚrR)ak; (Exchange Rate

Systems)³

RbBnæ½GRtabþÚrR)ak;CaTUeTAmanskmµPaBenAkñúgTIpSaredaysarFnaKarBaNiC¢kmµ EtkarkMnt; TaMgGs;RtUveFVIeLIgeTAtamsßanPaBesdækic©rbs;RbeTs nig BiPBelak.

GRtabþÚrR)ak;Edlbt;Ebn (Floating or Flexible

Exchange Rate)³ Determined by the forces of demand and supply without

intervention from governments or central bankers. EXHIBIT 8 : Exchange Rate Determination in a Floating System

 

]TahrN_³ GRtabþÚrR)ak;enAelITIpSarrUbiyvtßú nig TIpSarsþúk. ]TahrN_³ lIhYr nig GaKar bþÚrR)ak;rbs;FnaKarkNþalmYycMnYneFVIkarbþÚrR)ak;tambMErbMrYlTIpSarrUbiyvtßúGnþrCati nig TIpSarsþúk.

$ per £

The market for Pounds

The market for Dollars

£ per $

1.80

1.60

Billions of $

D

£

S

£

Billions of £320300 480 576

0.555

0.625

D$

S$

6

GRtabþÚrR)ak;RtUv)ankMnt;efr (Fixed

Exchange Rate)³ Official authorities stand ready to purchase or sell foreign currency in order to balance the demand and supply at the target (fixed) exchange rate.

]TahrN_³ kalBIqñaM 1995 RbeTskm<úCaCMBak;bMNulRbeTsrUsSIú cMnYn 812 lan rUbø b¤ 406 lan duløar EdleyIgeXIjfavasßitenAkñúgGRta 1

rUbø = 0.50 $.

enAeBleBlbc©úb,nñenHR)ak;rbs;RbeTsrUsSIúFøak;cuHk_edayRbeTskm<úCanwgsgeTAeGay RbeTsrUsSIúvijkñúgkMritGRtabþÚrR)ak;dEdl KW 0.50 $ b¤cMnYn 406

landuløardEdl.EXHIBIT 9 : Exchange Rate Determination in Fixed or Partially Floating System

GRtabþÚrR)ak;sßitenAeRkamkarRKb;RKg (Floating within a band or Managed Exchange Rate)³ Official authorities stand ready to purchase or sell foreign currency if the exchange rate diverges from a predetermined band.

EXHIBIT 9 : Exchange Rate Determination in Fixed or Partially Floating System

7

EXHIBIT 9 : Exchange Rate Determination in Fixed or Partially Floating System

$ per £

Fixed regime Partially floating regime (Fixed within a band)

1.60

D £

S £

Billions of £340300 300 330

1.30

1.60

1.90

Billions of £350

D £

S £

What makes prices of currencies consistent in different markets?1.      Arbitrage:

  -Purchase Pounds with Dollars in London.-Sell Pounds for Dollars in New York.

2.      Triangular arbitrage:-Purchase Euro with Dollars in Frankfurt.-Sell Euro for Pounds in London.-Sell Pounds for Dollars in New York.

sUmemIlenATMB½rTI205

8

1-3-lkçN³énTIpSarbþÚrR)ak;breTs(The

Nature of the Foreign Exchange Market)³ TIpSarbþÚrR)ak;minmanTItaMgenAmYykEnøgNamYyc,as;las;enaHeT. vaKWCa bNþajkargarrbs;FnaKar QµÜjkNþal GñkbþÚrR)ak; breTs (Foreign exchange dealers)EdlRtUv)antP¢ab;edayRbBnæ½TMnak;TMngeGLicRtUnik. lkçN³sMxan;²BIrya:g rbs;TIpSarbþÚrR)ak;breTs KWmankarkt;sMKal;BiessmYy.-dMbUgenHKWfa

TIpSarminEdlsMrakeT. manry³eBlEtbIem:agKt;EdlTIRkugLúgd_ TIRkugtUküÚ nig TIRkugjÚv y:k biTTVarsMrak. Etkñúgry³eBlbIema:genHk_enAmankaredaHdUr enAtammCÄmNÐltUc²mYycMnYnenAbnþpgEdr CaBiessTIRkug san;RhVan;sIusáÚ nig TIRkugsIdnIrbs; RbeTsGURsþlI.-lkçN³TIBIrKWfa

visalPaBénkarrYmKñaénmCÄmNÐlBaNiC¢kmµepSg²KñaCaeRcIn. bNþajExSTUrsB½ÞedaypÞal; TUrsar nig TMnaklTMngtamma:suInkMuBüÚT½r enAtammCÄmNÐl BaNiC¢kmµCuMvijBiPBelak)anbegáIteGaymanTIpSarEtmYy.

9

1-3-tYnaTIrbs;TIpSarbþÚrR)ak;breTs(The

Functions of Foreign Exchange Market)³1.karbþÚrrUbiyb½NÑ (Currency Conversion)³

• tamry³GñkeTscrN_³ GñkeTscrN_GaemrikminGacykR)ak;duløar eTATijTMnij enAtamhagkñúgRbeTsCbu:n)aneT.

• tamry³kareFVICMnYjGnþrCati³ manlkçN³4y:agsMxan;²KW Foreign company pay in foreign currency Pay the foreign company back for goods and services Currency speculation Spare cash for money market investment

2.karFnaTl;nwghaniP½yénkarbþÚrR)ak;breTs(Insuring against Foreign Exchange Risk)

muxgarTI2rbs;TIpSarbþÚrR)ak;breTs KWpþl;karFnaedIm,IKaMBarRbqaMgTl;nwghaniP½y elIkarbþÚrR)ak;breTs (Foreign exchange

risk), Spot Exchange Rate, Forward Exchange Rate, and Currency Swaps

10

2-RTwsþIesdækic©énkarkMnt;GRtabþÚrR)ak;³2-1-éfø nig GRtabþÚrR)ak; (Prices and

Exchange Rate)³c,ab;énéfø (Law of One Price)³ c,ab;énéføEcgfa

enAkñúgTIpSarEdlminKitBIkarcMnayelIéfødwkCBa¢Ún nig r)aMg BaNiC¢kmµ¬dUcCataragBnæKy¦ enaHplitplEdldUcKñalk;enAkñúgRbeTsepSgKñaRtUvEt lk;kñúgtMéldUcKña enAeBlEdléførbs;vaRtUv)anbBa¢ak;enAkñúglkçx½NÐrUbiyb½NÑdUcKña.

efrPaBGMnacTij (Purchasing Power Parity-

PPP)³

vaKYrGacRtUv)ankMnt;faCaGRtabþÚrR)ak;Bit (Real exchange rate) b¤ GRtabþÚr R)ak;efrPaBGMnacTij (PPP exchange rate)

EdlKYrnwgmanRsab RbsinebITIpSarCaTIpSar manRbsiTæiPaB. efrPaBGMnacTijRtUv)aneKEbgEckCaBIrKW³

-efrPaBGMnaTijdac;xat (Absolute Purchasing Power Parity)

-efrPaBGMnacTijeFob (Relative

Purchasing Power Parity)

11

 karpÁt;pÁg;rUbiyvtßúnigGtiprNaéfø (Money Supply and Price Inflation)³

ebIGñkKitBIcMnucsMxan;bMputenaHKWfa RTwsþI PPP BüakrN_fa bMErbMrYlnUvéføeFob nwgCHlTæpleTAdl;bMErbMrYlnUvGRtabþÚrR)ak;.

-karpÁt;pÁg;rUbiyvtßúekInelOn CagkMenInkarplit)an (Output increases).   -kMenIn\NTanenHGacCYyeGaymankMenIn tMrUvkardl;TMnij nig esvakmµ.

-brimaNrUbiyb½NÑenATMenreRcIneFVIeGaymanbMErbMrYllkçx½NÐTIpSarbþÚrR)ak;.

karsakl,gsMGagelIBiesaFn_énRTwsþIefrPaBGMnacTij³

tamkarbRsayxagelI eyIgeXIjfaenAkñúgkarGnuvtþn_manPaBxusKñacMeBaHRTwsþI PPP eRBaHRTwsþienHhak;bIdUcCaGnuvtþn_)anEtkñúgkarBüakrN_ry³eBlEvg. CagenHeTA eTot KW vaCakarBüakrN_)and_RbesIrsMrab;RbeTs EdlmanbBaðaGtiprNax<s; nig RbeTs EdlmanTIpSarmUlFnGPivDÄn_Tab.

12

2-2-tMrUvkar-karpÁt;pÁg;rUbiyvtßúCamYytulüPaBGRtabþÚrR)ak;³

GRtabþÚrR)ak;RtUv)ankMnt;CaTUeTAedayGnþrkmµrvagtMrUvkar nig karpÁt;pÁg;rUbiyvtßúkñúg tMélrUbiyvtßúrbs;RbeTsmYyeFobCamYyrUbiyvtßúrbs;RbeTsmYyeTot ¬R)ak;erol nig duløar¦.

Domestic residents purchase foreign assets

Domestic residents purchase foreign imports

The supply of foreign exchange arises

Domestic residents transfer income to own country

Domestic residents transfer income overseas

Domestic residents purchase domestic exports

The demand for foreign exchange arises

Domestic residents purchase domestic assets

karpøas;bþÚréntMrUvkar nig karpÁt;pÁg;rUbiyvtßúbreTsGaRs½yeday³

-kMenInplitplkñúgRsukdul (GDP growth)

-éføTMnijkñúgRsukeFobnwgéføTMnijbreTs

-PaBxusKñaénGRtabþÚrR)ak; -

kar)a:n;sµanTukéntMélduløareTAGnaKt

13

2-3-GRtakarR)ak;nigGRtabþÚrR)ak; (Interest Rate and Exchange Rate)³

RTwsþIesdækic©)anR)ab;eyIgeGaydwgfa GRtakarR)ak;qøúHbBa©aMgBIkarrMBwgTuknUvGRta GtiprNaEdlGacekItmannaeBlGnaKt.

Gñkesdækic©mñak;eQµaH Irvin Fisher

(1896) CaGñkesdækic©buraN Edl)anrkeXIj\TçiBlmYyKW Fisher Effect

The Fisher Effect states that a country's "nominal" interest rate ( i ) is the sum of the required "real" rate of interest ( r ) and the expected rate of inflation over the period for which the funds are to be lent ( I ). ( i ) = ( r ) + ( I )

-GRtakarR)ak;manEtnam (Nominal

Interest Rate)³ CaGRtakarR)ak;manEtnamKWCa GRtakarR)ak;EdlRtUv)aneKkMnt; nig e)aHpSayenAelImUlbRt½ b¤ kMcInaeBlbc©úb,nñ.

-GRtakarR)ak;Bit (Real Interest Rate)³ CaGRtaTinñpleGayeTAGñkpþl;kMcI b¤ Gñk vinieyaK EdlRtUv)aneKvas;eFobeTAnwgGMnacTijBitR)akdrbs;va mann½yfaplkMérénGRta karR)ak; enHenAEtpþl;eGayeyIgTijTMnij nig esvakmµy:agehacNas;)ancMnYndEdl ebIeFob eTAnwgeBlmun.

14

eyagtamviFanrbs;elak Fisher

eyIgTaj)anBIrbbGRtabþÚrR)ak;k_ERbRbYleTAtam GtiprNa dUcKñanwgGRtakarR)ak;enHpgEdrKW³ Ca \TçiBlhVIs½rGnþrCati -IFE (International Fisher Effect). dUcbBa¢ak;tamrUbmnþ³

(S1 –S2) / S2 × 100 = i$ - i`

Edl i$

CaGRtakarR)ak;manEtnamenAkñúgRbeTsGaemrik

i`

CaGRtakarR)ak;manEtnamenAkñúgRbeTskmçúCa

S1Ca (Spot exchange rate at the beginning of period)

S2 Ca (Spot exchange rate at the ending of period)

-GRtabþÚrR)ak;manEtnam (Nominal

Exchange Rate)³ CaGRtabþÚrR)ak;rvagrUbiyvtßúrbs; RbeTsBIredayminTan;)ansMrbsMrYlnUvbMErbMrYlénkMritéførbs;RbeTsTaMgBIr.

-GRtabþÚrR)ak;Bit (Real Exchange Rate)³ CaGRtabþÚrR)ak;rvagrUbiyvtßúrbs;RbeTsBIr eday)ansMrbsMrYlCarYceRscnUvbMErbMrYlénkMritéførbs;RbeTsTaMgBIr.

15

2-3-citþsaRsþTIpSar (Market Psychology)³ PsþútagtambTBiesaFn_)anR)ab;eGaydwgfaminEmnTaMgRTwsþIsmPaBGMnacTij-PPPnig minEmnTaMg\TçiBlhVIs½rGnþrCati-IFE

EdlGacBnül;)anl¥ nig c,as;las;clna ry³eBlxøIenAkñúgGRtabþÚrR)ak;.

EtebIeyagtamkarsikSanaeBlfµI²enH)anbgðajfa³ -citþsaRsþrbs;GñkvinieyaKGacRtUv)anTTYl\TçiBlBIktþaneya)ay nig RBwtþkarN_ mIRkUesdækic©rhUteTAdl;m:aRkUesdækic©.-elIsBIenHKW\TçiBl (Bandwagon Effect) GacTaMgRtUv)aneFVIeGayekþA Rkhay nig eFVIeGayekItmanerOgeday\riyabfEbøk²rbs;Gñkneya)ay. EX³RbeTsGasuIGaeKñy_kñúgkMLúgqñaM 1997 enAeBlrUbiyb½NÑ rbs;RbeTsbnþKña dUcCa RbeTséf m:aeLsIu kUerxagt,Úg nig RbeTs\NÐÚensIu )an)at;bg;tMélBI 50% eTA 70% Tl;CamYyR)ak;duløarrbs;Gaemrik Etkñúgry³eBlbu:nµanExbu:eNaÑH.

16

EXHIBIT 10: Changes In the Demand for and Supply of Loanable Funds

Effects of increased supply of loanable funds with demand unchanged

Rate of interest (percent per annum)

Volume of loanable funds

i1

i2

C2C1

DT

SLF

S'LF

Effects of increased demand of loanable funds with supply unchanged

Rate of interest (percent per annum)

Volume of loanable funds

i2

i1

C2C1

DT

SLF

D'LF

17

karvas;cMnUlBIGRtakarR)ak; (Measures

of Interest Yields or the Rate of Return)³amount of credit made available to the borrower

fee required by the lender in order for the borrower to obtain creditAnnual rate of interest on loanable funds

(in percet) 100

]TahrN_³ mUlniFikMcImYyEdlTwkR)ak;cMnYn 10,000 $ Gñkx©I)ansnüaeGayesahu‘y dl;m©as;vacMnYn 600 $

sMrab;Cakartbsñgdl;R)ak;edIménkarpþl;\NTanenaHsMrab;ry³eBl mYyqñaM enaHGRtakarR)ak; RbcaMqñaMelI mUlniFikMcI KW 6%.

GRtaKUb:ug (Coupon Rate)³

One of the best-known measures of the rate of return on a debt security is the coupon

rate, which appears on government, municipal, and corporate bonds and notes. Coupon Rate × par value = Coupon 0.09 × 1,000 = 90

]TahrN_³ sBaØab½NÑmYymantMélcuHelIb½NÑ Par value rbs;vaKW 1,000 $ edayman GRtaKUb:ug Coupon rbs;vacMnYn 9% enaHeKRtUvbg; KUb:ug Coupon RbcaMqñaMKW 90 $.

18

tMélbc©úb,nñ (Present Value):

tMélbc©úb,nñKWCasBaØaNd_samBaØmYyEdlfa 1 duløarEdl )anbg;eTAeGayGñk 1 qñaM BI\lUvKW mantMélTabCag 1 duløarEdl)an bg;eGayGñkenAéfenH. GñkGacvinieyaKva ehIyGacrkkarR)ak;)an.

•GRtakarR)ak;Fmµta (Simple interest rate) 1 $

PV future 1 $(1 + i )n

•TinñplrhUtdl;GayukalkMnt; (Yield to Maturity or YTM)

-YTM sMrab;karpþl;kMcIFmµta (YTM for a simple loan)

-YTM sMrab;karpþl;kMcIedaymansMngefr (YTM for a fixed payment loan)

-YTM sMrab;sBaØab½NÑEdlmanKUbu:g (YTM coupon bond) -YTM rbs;sBaØab½NÑEdlmanGb,har (YTM of a discount bond)

-Tinñplcrnþ (Current yield)

-TinñplelIeKalGb,har (Yield on a Discount Basis) -TinñpltamRKakan;kab; (Holding Period Yield)

19

•TinpltamRKaEdl)ankan;kab; (Holding Period

Yield)³

cMnUltamRKaenHRtUv)aneKKNnatamrUbmnþdUc teTA³

Edl P Caeflk;crnC CacMnUlrMBwgTukRbcaMqñaM b¤

Cakarbg;KUb:ugn CacMnYnqñaM rhUtdl;GayukalkMnt;

; F CatMelcuHelIbN•GRtakarR)ak;KitedayGñkpþl;kMcItamRKwHsßan (Interest Rate charged by Institutional Lenders)³ mankarKNnadUc)ansikSarYcehIyenAkñúgKNitviTüasMrab;esdækic© nig CMnYjrYcehIyKW manviFIsaRsþBIsMxan;²dUcCa viFIsaRsþcgkarR)ak;eTal (the Simple interest method) nig viFIsaRsþcgkarR)ak;pÁÜb (the Compound

interest method).

ni

FC

i

C

i

CP

)1()1()1( 21

20

3-2-clnaGRtakarR)ak;enAkñúgesdækic©³

rcnasm<næ½énGRtakarR)ak; (The

Structures of Interest Rate)³BitNas;

GRtakarR)ak;Ca)atuPUtmYyd_sµúKsµajEdlTTYlBI\TæiBl nigktþaCaeRcIn. GRtakarR)ak;EdlKitelImUlbR½t ¬GRtab½NÑrtnaKarCamFüm¦ KWsMrYleTAtam (Liquidity premium) + (Expected rate

of inflation) + (risk-free or real rate of interest). cMEnkmUlbR½tEdlCaGRtamFümén sBaØab½NÑsaCIvkmµ RtUvKitBIrcnasm<½næixagelI rYmCamYy (premium for lower marketability) + (call risk

premium) + (default risk premium).

karkMnt;GRtakarR)ak;enAkñúgesdækic© (Interest Rate Determinations in Economy)³ GRtakarR)ak;CaFmµtaRtUv)ankMnt;enAkñúgKMrUénrgVas;esdækic© (econometric

model) eTAtamktþaCaeRcInmandUcCa eKalneya)ayrUbiyvtßúrbs;FnaKarkNþal eKal neya)ayBnædar nig fvikarrbs;rdææaPi)al karpÁt;pÁg;énmUlbR½tbMNulÉkCn tMrUvkarbreTs sMrab;mUlFneFVIvinieyaK nig CaBiess KWenAeBlNamanbMErbMrYlnUvcMnUlCatirbs;RbeTsenaH.