Question : What is the term used to describe the rate at which one currency can be exchanged for another in the spot market?
Option 1: Forward exchange rate
Option 2: Cross exchange rate
Option 3: Nominal exchange rate
Option 4: Real exchange rate
Correct Answer: Nominal exchange rate
Solution : The correct answer is c) Nominal exchange rate
The term used to describe the rate at which one currency can be exchanged for another in the spot market is the nominal exchange rate. The nominal exchange rate represents the current market rate at which currencies are traded for immediate delivery, also known as the spot rate.
The nominal exchange rate is quoted and observed in the foreign exchange market and is typically expressed as the value of one currency in terms of another currency. For example, if the nominal exchange rate between the US dollar and the euro is 1.20, it means that one US dollar can be exchanged for 1.20 euros.
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