Question : The rate at which one currency can be exchanged for another in the future is known as the ________ exchange rate.
Option 1: spot
Option 2: forward
Option 3: real
Option 4: nominal
Correct Answer: forward
Solution : The correct answer is (b) forward.
The forward exchange rate is the rate at which one currency can be exchanged for another at a specified future date. It is a contractual rate agreed upon between two parties to exchange currencies at a future date. The forward exchange rate is determined by the prevailing spot exchange rate and the interest rate differentials between the two currencies. It is commonly used by businesses and investors to hedge against future currency fluctuations and to plan their international transactions. The forward exchange rate allows parties to lock in an exchange rate in advance, providing certainty for future transactions involving different currencies.
Question : What is the term used to describe the rate at which one currency can be exchanged for another in the future, based on a contractual agreement?
Option 1: Spot exchange rate
Option 2: Nominal exchange rate
Option 3: Real exchange rate
Option 4: Forward exchange rate
Question : What is the term used to describe the rate at which one currency can be exchanged for another immediately, without any delay?
Option 2: Forward exchange rate
Option 3: Nominal exchange rate
Option 4: Real exchange rate
Question : What is the term used to describe the rate at which one currency can be exchanged for another in the spot market?
Option 1: Forward exchange rate
Option 2: Cross exchange rate
Question : What is the term used to describe the rate at which a currency can be exchanged immediately in the spot market?
Option 1: Nominal exchange rate
Option 2: Real exchange rate
Option 3: Cross exchange rate
Option 4: Spot exchange rate
Question : The nominal exchange rate is defined as:
Option 1: The rate at which one currency can be exchanged for another.
Option 2: The rate at which a currency can be exchanged for goods and services.
Option 3: The rate at which a currency can be exchanged for gold.
Option 4: The rate at which a currency can be exchanged for other financial assets.
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