When should you use the exchange rate on a holiday or weekend?

Using the previous business day's rate during a holiday or weekend is appropriate because financial markets, including those for currency exchange, are typically closed on these days. As a result, there is no updated market rate available until the next business day when the markets reopen.

When a transaction occurs during a holiday or weekend, utilizing the last available rate ensures consistency with the most recent market conditions. The previous business day's rate provides an accurate reflection of the exchange rate just prior to the closure of the market. This practice is vital for maintaining fairness and reliability in transactions, particularly when determining cost bases for imports or exports or managing financial accounts affected by currency changes.

The other choices are not suitable in this context. The current market rate cannot be used because it is not available during non-business days. The next business day's rate would not reflect the market conditions applicable to the transactions that occur over the weekend or holiday. Any rate from the last trading session may introduce inaccuracies if not specifically the closing rate from the previous business day, as it could potentially include rates that are not final or reflective of the most established value.