Kaylee Padilla
Professor Colton
November 3, 2015
International Financial Management
Chapter 6: Questions 1-5
1. Under a *xed exchange rate system, it is the a,empts made by the government to obtain exchange
rates within one percent of the initial set value. Under a freely .oating system, intervention by the
government would not be existent. Under a managed .oat system, the governments will admit exchange
rates to move accordingly with the market forces. The government will get in between if they believe it’s
necessary however. A freely .oating system could help correct balance-of-trade deficit because the
currency would adjust according to market forces. Countries are also more insulated from problems of
outside foreign countries under a freely .oating exchange rate system. However, a
disadvantage of freely .oating exchange rates is that firm are exposed to exchange rate risk and they
