14-46 The FI is acting as a speculator when it
A)buys or sells currency to balance the FI's net exposure.
B)takes a nonzero net position in a particular currency.
C)processes an exporter's transaction in a foreign currency.
D)makes a market in a currency.
E)advises customers on their international business.

Question

Quizplus · Accepted Answer

A speculator takes a nonzero net position in a particular currency with the aim of profiting from fluctuations in its exchange rate. Therefore, when an FI takes a nonzero net position in a currency, it is acting as a speculator. The other options relate to other functions of an FI in the foreign exchange market (balancing net exposure, processing transactions, making a market, and advising customers), but they do not necessarily involve speculative activities.

14-46 the FI Is Acting as a Speculator When It