If the purpose of buying currency contracts is to realize a net gain, then the purchaser is _____ and not _____.
A)hedging….speculating
B)speculating….hedging
C)speculating….financing
D)hedging….financing
E)Purchasers do not get involved in managing currency fluctuation as this is solely a finance department activity.

Question

Quizplus · Accepted Answer

The purpose of buying currency contracts with the goal of realizing a net gain is typically for speculation purposes, as the purchaser is betting on the future direction of currency exchange rates. Hedging, on the other hand, involves using currency contracts to protect against potential losses due to currency fluctuations, rather than for the purpose of making a profit. Financing is another use of currency contracts, but it typically involves using them to facilitate international trade and investment transactions, rather than for speculation or hedging purposes. Option D is incorrect because financing is not typically the purpose of buying currency contracts to realize a net gain. Option E is incorrect because it assumes that finance departments are solely responsible for managing currency fluctuations, which is not necessarily true.

If the Purpose of Buying Currency Contracts Is to Realize