What Rate Should Be Used If the Settlement Date in a Foreign

question 393

Multiple Choice

What rate should be used if the settlement date in a foreign exchange transaction is no longer a "good" date?

• A) The original rate of the transaction
• B) The original rate of the transaction adjusted by the relevant forward points
• C) The affected parties should agree to adjust the exchange rate according to the prevailing relevant forward mid swap points at the time the bank holiday is announced
• D) The rate is open to negotiation by the two parties

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Definitions:

Cost of Capital

The rate of return that a company must earn on its investments to maintain its market value and satisfy its investors and creditors.

Foreign Project

A business venture or investment located outside the investor's domestic country, often subject to additional risks such as currency fluctuations and political instability.

Domestic Project

A project undertaken within a country's borders, focusing on local development or business activities.

Interest Rate Parity

A theory suggesting that the difference in interest rates between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.