ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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spot exchange rate
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money exchange rate
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forward exchange rate
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fixed exchange rate
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Detailed explanation-1: -A three-month forward rate is equal to the spot rate multiplied by (1 + the domestic rate times 90/360 / 1 + foreign rate times 90/360). To calculate the forward rate, multiply the spot rate by the ratio of interest rates and adjust for the time until expiration.
Detailed explanation-2: -$1/€1 → $1.20/€1 means that the dollar has depreciated relative to the euro. It now takes $1.20 to buy one euro, so that the dollar is less valuable. The euro has appreciated relative to the dollar: it is now more valuable.
Detailed explanation-3: -Answer and Explanation: An agreement to exchange dollar bank deposits for euro bank deposits in one month is a C) forward transaction . Forward transactions are non-standard, customized, agreements to buy or sell an asset-in this case a foreign currency-at a specified future time and price.