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Purchasing a foreign currency contract from a bank at a future rate is an example of a transaction in the:
ASpot market
BRetail market
CForward market
DRegulated market
Answer & Solution
Correct answer: C. Forward market
1. A forward or future market involves contracts promising to pay and deliver goods at some future date.
2. Buying a foreign currency contract at a future rate is the textbook example of such a transaction.
3. A spot market would require payment immediately or within a short span, so it is ruled out.
4. Hence the forward market is correct.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit I "Meaning and Types of Markets", p.3_
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