The Interest Rate on Borrowings in Rhodia Is 2 Percent

question 49

Multiple Choice

The interest rate on borrowings in Rhodia is 2 percent and the interest rate on bank deposits in Maritia is 7.5 percent.In this scenario,a carry trade would be to

• A)borrow money in Maritian currency,convert it into Rhodian currency,and deposit it in a Rhodian bank.
• B)borrow money in Rhodian currency and invest in stocks with good growth potential in Rhodia.
• C)borrow money in Rhodian currency,convert it into Maritian currency,and deposit it in a Maritian bank.
• D)invest in bank deposits of Maritia and reinvest the earnings in Rhodia.
• E)invest in bank deposits of Rhodia and reinvest the earnings in Maritia.

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