Question

When two parties agree to exchange currency and execute the deal immediately, the transaction is a A) futures exchange. B) carry trade. C) spot exchange. D) forward exchange.

Answer 1

When two parties agree to exchange currency and execute the deal immediately, the transaction is a "forward exchange".

Option: D

Explanation:

The reconciliation among parties of two for future interchange of two particular currencies at a stipulated time period is known as a forward contract. Such contracts frequently arise on a day after the day the point contracts fix and get utilised to safe the buyer from variations in currency cost.

For an instance, an organization or firm that speculate to receive $30 million in 90 days will engage into a forward agreement to transmit the $30 million, and receive equivalent  Euros in 90 days at today's displayed exchange rate. This rate is referred to as the forward figure.