After studying the content within this chapter, you will:

1. Be familiar with the form and function of the foreign exchange market.
2. Understand the difference between spot and forward exchange rates.
3. Understand how currency exchange rates are determined.
4. Appreciate the role of the foreign exchange market in insuring against foreign exchange risk.
5. Be familiar with the merits of different approaches toward exchange rate forecasting.
6. Appreciate why some currencies cannot always be converted into other currencies.
7. Understand how countertrade is used to mitigate problems associated with an inability to convert currencies.