The most important (in terms of dollar value) type of foreign exchange transaction by U.S.banks is the
A) spot transaction.
B) forward transaction.
C) swap transaction.
D) option transaction.

Question

Quizplus · Accepted Answer

The graph depicts the market for Swiss Francs, which suggests a spot transaction where two parties agree to exchange currencies at a specific rate within two business days. A forward transaction is a similar agreement, but the exchange happens at a specified date in the future. A swap transaction involves simultaneous spot and forward transactions, while an option transaction gives the buyer the right, but not the obligation, to exchange currencies at a predetermined rate. Based on the graph, it can be inferred that spot transactions are the most relevant for the U.S. banks dealing with Swiss Francs.

The Most Important (In Terms of Dollar Value) Type of Foreign