A trader in Switzerland just agreed to trade Swiss francs for British pounds based on today's exchange rate.The trade is expected to settle tomorrow.What term best describes this exchange?

Question

Quizplus · Accepted Answer

This exchange is a spot trade because it involves the immediate exchange of currencies at the current exchange rate and is expected to settle the following day. Arbitrage transactions involve exploiting price differences in different markets, forward trades involve agreements to exchange currencies at a future date and rate, purchasing power parity relates to the equilibrium exchange rate between two currencies, and interest rate parity refers to the relationship between interest rates and exchange rates.

A Trader in Switzerland Just Agreed to Trade Swiss Francs