When a Tourist Goes to a Bank in a Foreign

question 48

Multiple Choice

When a tourist goes to a bank in a foreign country to convert money into the local currency, the exchange rate used is the

• A) currency swap rate.
• B) forward rate.
• C) carry trade.
• D) spot rate.

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Definitions:

Inflation Rates

The pace at which overall prices for goods and services climb, diminishing the value of money.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Interest Rate

The percentage charged by a lender to a borrower for the use of assets, reflecting the cost of borrowing money.

Future Payment

A payment that is scheduled to be made at a specified date in the future.