SIE (Securities Industry Essentials) Practice Exam

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When selling a fixed amount of a base currency to purchase a counter currency, which of the following factors is primarily used to determine how much of the counter currency the customer will receive?

The forward exchange rate
The spot exchange rate
The interest rate differential
The country's economic performance

The correct answer is: The spot exchange rate

The reason why options A, C, and D are incorrect is because they are not directly related to determining the amount of counter currency a customer will receive when selling a fixed amount of a base currency. The forward exchange rate refers to a future exchange rate, not the immediate rate used in a transaction. The interest rate differential may affect the value of the currencies, but it is not a factor in determining the amount received in a transaction. The country's economic performance may also impact currency values, but it is not the primary factor in determining the amount received in a transaction. The spot exchange rate is the most relevant factor in this scenario as it is the current exchange rate used in the transaction.