Carry Trade Refers to

question 3

Multiple Choice

Carry trade refers to

• A) covered interest arbitrage in the spot and forward markets.
• B) moving investment funds to countries in which there is less risk.
• C) borrowing low-yielding currencies and lending high-yielding currencies.
• D) exporting to one country and importing from another.

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Definitions:

Effective Interest Rate

The actual annual interest rate that takes compounding into account, providing a more accurate representation of the cost of borrowing.

Net 25

A payment term indicating that the full payment is due within 25 days from the invoice date.

365-Day Year

A calendar basis used in various financial calculations, assuming the year consists of exactly 365 days for simplifying interest and other time-sensitive computations.

Temporary Working Capital

The additional working capital needed to support fluctuations in business activity during peak periods.