Which of the following is best defined by the conversion of one currency into another at Time 1, with an agreement to revert it back to the original currency at a specific Time 2 in the future ?
A) Currency swap
B) Direct currency transaction
C) Spot currency transaction
D) Forward currency transaction

Question

Quizplus · Accepted Answer

This is best defined as a currency swap, which involves exchanging one currency for another with an agreement to reverse the transaction at a specific future date. A currency swap is a contract between two parties agreeing to exchange a series of cash flows in two different currencies at Time 1 and then back again at a specific Time 2 in the future. This allows each party to obtain their desired currency without having to go to the foreign exchange market, and can be used to hedge against currency risk.

Which of the Following Is Best Defined by the Conversion