International Business Study Set 5
Quiz 10: The Foreign Exchange Market
Differences in the Spot Exchange Rate and the 30-Day Forward
Differences in the spot exchange rate and the 30-day forward rate are normal and reflect the expectations of the foreign exchange market about future currency movements.
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If the spot rate is $1 = ¥120,and the 30-day forward rate is $1 = ¥130,the dollar is selling at a discount in the forward market.
A currency swap is the rate at which a foreign exchange dealer converts one currency into another on a particular day.
A currency swap deal enables companies to insure themselves against foreign exchange risk.
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