The National Bank has an agreement with The Foreign Bank to exchange 500,000 U.S.dollars for 380,000 Euros on the first day of each of the next 3 calendar quarters.This agreement is best described as a(n):
A)floating exchange.
B)spot trade.
C)option.
D)futures contract.
E)swap contract.

Question

Quizplus · Accepted Answer

This agreement is a swap contract because it involves the exchange of two currencies at different times in the future. The exchange is predetermined and each party has agreed to the terms of the contract.

The National Bank Has an Agreement with the Foreign Bank