Question
__ is the arrangement whereby the payee grants longer -term credit if his own currency is weakening in relation to that of the payer, again assuming the payer's currency is to be used for the settlement of the transaction. (Select the missing word below to complete the sentence) Lagging Forward contract Leading Matching - Previous
Answer
4.3
(257 Votes)
Oswald
Professional · Tutor for 6 years
Answer
Lagging
Explanation
## Step1: The question asks about an arrangement wherein the payee grants longer-term credit if his own currency weakens in relation to the payer's. Moreover, the payer's currency would be used for transaction settlement.## Step2: Understanding what every term specifically means, we find that 'Leading' is the process of settling a transaction in advance, which is not applicable in the condition described in the question. ## Step3: It cannot be 'Matching' as matching in finance generally refers to the process by which correspondences between account transactions are made, so it doesn't fit into the case described in the question.## Step4: Similarly, a 'Forward contract' is an agreement to buy or sell an asset at a future specified date & time at the current forward price, which does not meet the constraints outlined in the question.## Step5: Finally, considering 'Lagging' which means delaying payments otherwise due, in the hope that the foreign currency will strengthen (thus decreasing the cost when converted into the home currency), making options more economic. This exactly matches the scenario outlined in the question.