When Two Parties Agree to Exchange Currency and Execute the Deal

question 31

Multiple Choice

When two parties agree to exchange currency and execute the deal immediately,the transaction is referred to as _____.

• A) forward exchange
• B) countertrade
• C) arbitrage
• D) spot exchange
• E) currency swap

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Definitions:

Exchange Gain

Exchange gain arises when a company holds foreign currency or transactions, and the exchange rate moves in its favor, increasing the value of the foreign currency held.

Loss

A decrease in net assets or wealth, often realized when expenses exceed revenues or when assets lose value and is reflected in the financial statements.

Forward Exchange Contract

A financial contract between parties to exchange currencies at a predetermined rate on a specified future date.

Contractual Obligation

A duty or commitment that is legally enforceable due to a contract agreement.