Question

Trades of foreign currencies in the interbank market settle: I Spot II Cash III Forward IV Future StatusA A. I and III StatusB B. III and IV StatusC C. I and IV StatusD D. II and III

Answer 1

Trades of foreign currencies in the interbank market can settle as either Spot or Forward contracts, where Spot settlements occur usually within two business days and Forward settlements are agreed upon for a future date. Therefore, the correct answer is: StatusA A. I and III

Step-by-step explanation:

Trades of foreign currencies in the interbank market settle in several ways, depending on the type of transaction being conducted. When trading on the interbank market, there are four key types of settlements:

• Spot: Settlement occurs 'on the spot', usually within two business days after the trade is executed.
• Cash: Immediate settlement.
• Forward: Settlement will occur at a specified date in the future, more than two business days after the trade date.
• Future: Similar to forwards but are standardized contracts traded on exchanges, and they settle on specific dates.

Considering the options provided, trades of foreign currencies in the interbank market settle for I Spot and III Forward.

Therefore, the correct answer is: StatusA A. I and III