Assume That the Interest Rate on Borrowings in Japan Is

question 26

Multiple Choice

Assume that the interest rate on borrowings in Japan is 1 percent, while the interest rate on deposits in Australian banks is 5 percent. A trader borrows in yen and then converts the money into Australian dollars and deposits it in an Australian bank to make a 4 percent margin. Which type of trade is this an example of?

• A) Swing trade
• B) Carry trade
• C) Channel trade
• D) Price action trade

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Definitions:

NAV

Net Asset Value; the total value of a fund's assets minus its liabilities, usually expressed as a price per share.

Wilshire 5000 Index

A market-capitalization-weighted index of the market value of all US-based stocks actively traded in the United States.

Mutual Fund

An investment vehicle comprised of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets.

S&P 500 Index

A stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.