Question

A British firm may need dollars to pay for U.S. imports. It can work with banks in London to exchange pounds for dollars to make this payment via electronic transfer. This is an example of a(n) _____ market.

Answer 1

The correct answer is Spot market.

Step-by-step explanation:

The spot market or spot market is one in which both the transaction and the settlement of an operation coincide on the same date. Although it is considered cash market when delivery occurs up to a maximum of 2 days later.

In spot markets, transactions are usually settled within a day or two after the date of purchase / sale. This is what is understood as a settlement in D + 1 or D + 2. The transactions are also closed at the current price on the asset in question that exists at the time of the transaction. This is one of the main differences between the cash market and the futures market.