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Large commercial banks maintain demand deposit accounts with one another, which facilitates the efficient functioning of the FX market Bank A is in London. Bank

Large commercial banks maintain demand deposit accounts with one another, which facilitates the efficient functioning of the FX market

Bank A is in London. Bank B is in New York.

The current exchange rate is 1.00 = $1.25.

A currency trader employed at Bank A buys 320m from a currency trader at Bank B for $400 settled using its correspondent relationship.

The following is the balance sheet of Bank A and show the balance sheet after the above transactions happened

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