Question

The current exchange rate is £1.00 = $2.00. Compute the correct balances in Bank A's correspondent account(s) with Bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at Bank B for $90,000 using its correspondent relationship with Bank B.

Answer 1

Answer: Bank A's pound denominated account with B will rise by £45,000

Step-by-step explanation:

The correspondence account may be explained as an account created by a financial institution or bank to handle financial transactions such as deposit, receive funds and other financial obligations on behalf of another bank or financial institution.

In the scenario above, £1.00 = $2.00, using the correspondence relationship, Bank A's pound denominated account with B will rise by £45,000 as as a result of the transaction and the dollar denominated account of Bank A with B will fall by $90,000