A Common Type of Swap Transaction in the Foreign Exchange

question 25

Multiple Choice

A common type of swap transaction in the foreign exchange market is the ________ where the dealer buys the currency in the spot market and sells the same amount back to the same bank in the forward market.

• A) "forward against spot"
• B) "forspot"
• C) "repurchase agreement"
• D) "spot against forward"

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Definitions:

Marginal Cost

The additional cost incurred to produce one more unit of a good or service, highlighting the cost variations when adjusting production levels.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and loan payments.

Competitively Organized

A market structure where multiple firms compete against each other, allowing for a wide range of choices for consumers and promoting efficiency.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market with no close substitutes.