A bank exchanging foreign currency makes its profit in what manner?
A) On the difference between the spot rate and the foreign rate
B) A bank is forbidden, by law, to charge a premium in foreign currency exchange
C) On the present value of the forward rate discounted to the date an option is purchased
D) On the difference between the buying and selling rates

Question

Quizplus · Accepted Answer

Banks make their profit by buying foreign currency at a lower rate and selling it at a higher rate, thus making a profit on the difference between the buying and selling rates. This difference is known as the "spread" or "margin."

A Bank Exchanging Foreign Currency Makes Its Profit in What