Which of the following statements is correct?
A) The historical rate is the exchange rate on the date of the transaction and the closing rate is the exchange rate at the end of the reporting period.
B) The historical rate is the exchange rate on the date of the transaction and the closing rate is the rate on which any hedge transactions mature.
C) The spot rate is the rate on the date of the transaction and the relevant forward rate is the exchange rate used at the end of the reporting period.
D)None of the above are correct.

Question

Quizplus · Accepted Answer

The historical rate is the exchange rate on the date of the transaction and the closing rate is the exchange rate at the end of the reporting period. This is the generally accepted definition of these terms in the context of foreign currency transactions and financial reporting. Option B is incorrect because the closing rate is not related to hedge transactions. Option C is incorrect because the relevant forward rate is not always used at the end of the reporting period, and may only be used if the business has entered into a forward exchange contract.

Which of the Following Statements Is Correct