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. Foreign currency transactions can be executed on a spot or forward basis. Fill in the...

. Foreign currency transactions can be executed on a spot or forward basis. Fill in the blanks with the proper rate basis:

____________ the price at which foreign currency can be purchased or sold today.

____________ the price today at which foreign currency can be purchased or sold sometime in the future.

When executing trades on a spot or forward basis, premiums and discounts are involved. Circle or highlight the appropriate term: The forward rate can exceed the spot rate on a given date, in which case the foreign currency is said to be selling at a premium or discount in the forward market, or the forward rate can be less than the spot rate, in which case it is selling at a premium or discount.

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Answer #1

1. Spot Rate is the price at which foreign currency can be purchased or sold today.

2. Forward Rate is the price today at which foreign currency can be purchased or sold sometime in the future.

3. When executing trades on a spot or forward basis, premiums and discounts are involved. Circle or highlight the appropriate term:

  1. The forward rate can exceed the spot rate on a given date, in which case the foreign currency is said to be selling at a PREMIUM or discount in the forward market.
  2. The forward rate can be less than the spot rate, in which case it is selling at a premium or DISCOUNT.
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