Bank Errors

question 81

Multiple Choice

Bank errors

• A) occur because of time lags.
• B) must be corrected by debits.
• C) must be corrected by the bank.
• D) are corrected by making an adjusting entry on the depositor's books.

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Definitions:

Unbiased Forward Rates

Future rates of interest inferred from current bond prices, assuming no arbitrage opportunities.

Forward Rate

An agreed-upon price for a financial transaction that will occur at a future date, used in derivatives markets.

Exchange Rate

The worth of one currency in relation to another for converting between them, showing the amount one currency is equivalent to in another currency.

Interest Rate Parity

A theory which posits that the difference between the interest rates of two countries is equal to the difference between the forward exchange rate and the spot exchange rate.