Important Points for IC 89 - Management Accounting Exam
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Spot Transaction is almost common financial transaction used for immediate exchange of currencies, goods and services among the countries. It is almost a Cash Transaction without any charge of interest on it. It involves a direct exchange of currencies between the countries in quick rather instant succession.
Forward transaction is a financial exchange transaction in which the transaction between the parties is done at the rate of exchange fixed on the transaction date, while statement takes place at a future date. The transfer of money is not effected before the settlement date, which may vary from one week to one year.
Swap is the hybrid of above two transactions-Spot and Forward transactions in different direction requiring the two parties agree to exchange the currencies for a fixed period of time and to reverse the transaction at the future date.
The Swap means that a particular transaction on spot is temporary with a condition to move back in the opposite direction in the future.
Exchange Rate quotation is the rate at which the currency of one country is exchanged for or converted into the currency of another country. There are two types of market quotations: Direct quotation and Indirect quotation.
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