Forward exchange rates Select one: A)involve the exchange of bank deposits at a specified future date...

Forward exchange rates

Select one:

A)involve the exchange of bank deposits at a specified future date at a pre-established price
B)none

C) involve the immediate exchange of bank deposits at the current exchange rate (spot)
D)involve the immediate exchange of imports and exports

Solutions

Expert Solution

Q: Forward exchange rates

ANSWER : (OPTION A) involve the exchange of bank deposits at a specified future date at a pre-established price

Because, forward exchange rate ia a rate negotiated today between a bank and a client upon entering into a forward contract agreeing to buy or sell some amount of foreign currency in the future. It is a contracted price for a transaction that will be completed at an agreed upon date in the future date at a predetermined price . It is forward-looking.

The other options are not correct because immediate exchage cannot be done through forward contract. it is always focus on future transactions and also a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future

The forward rate, on the other hand, refers to the future exchange rate agreed upon in forward contracts.The forward exchange rate is the rate at which a commercial bank is willing to commit to exchange one currency for another at some specified future date.The forward exchange rate is a type of forward price.

jeff jeffy answered 1 year ago

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