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.

• 
  A. Bank A's pound-denominated account at B will rise by £45,000.
• B. Bank B's dollar-denominated account at A will fall by $90,000.
• C. Bank B's pound-denominated account at A will rise by £45,000
• D. Bank A's dollar-denominated account at B will rise by $90,000
  .

Answer 1

IF ANY QUERY, FEEL FREE TO ASK Solution Here, we can see that Bank B is correspondent of Bank A, that is we can say Bank B works for Bank A. Hence, When £ is bought at Bank A through a currency trader at bank B, Bank A £ account at Bank B will decrease by £45000 while $ account will increase by $90000. Hence, option D. Bank A's dollar-denominated account at B will rise by $90,000 is correct.