Question

Which statements are TRUE about the interbank market? I Trades settle on a forward contract basis II Trades occur in large blocks III Trades settle on a spot contract basis IV Trades take place 24 hours a day StatusA A. I and II only StatusB B. III and IV only StatusC C. II, III, IV StatusD D. I, II, III, IV

Answer 1

The interbank market is where banks and other financial institutions trade foreign exchange. Trades settle on either a forward contract or a spot contract basis and can occur in large blocks. The market operates 24 hours a day.

Step-by-step explanation:

The interbank market is where banks and other financial institutions trade foreign exchange.

• Trades settle on a forward contract basis: In this market, trades are typically settled on a forward contract basis, meaning that the exchange of currencies takes place at a future specified date and rate.
• Trades occur in large blocks: Due to the large volumes of currency being exchanged, interbank market trades often occur in large blocks.
• Trades settle on a spot contract basis: Trades in the interbank market settle on a spot contract basis, where the exchange of currencies happens immediately (within two business days).
• Trades take place 24 hours a day: The interbank market operates 24 hours a day, 5 days a week, allowing for continuous trading across different time zones.