Assume That the Interest Rate on Borrowings in Country a Is

question 32

Multiple Choice

Assume that the interest rate on borrowings in Country A is 2 percent and that on bank deposits in Country B is 7.5 percent.A carry trade in this scenario would be to:

• A)borrow in Country B's currency, then convert the money into Country A's currency and deposit it in a bank in Country A.
• B)borrow in Country A's currency, and invest in stocks with good growth potential in Country A.
• C)borrow in Country A's currency, then convert the money into Country B's currency and deposit it in a bank in Country B.
• D)invest in bank deposits of Country B and reinvest the earnings in Country A.

---

Definitions:

Acceptable Prices

Prices that consumers feel are fair for products or services, and are willing to pay.

Total Revenues

The overall amount of money received by a firm from sales of its products or services, before any costs are deducted.

Equilibrium Point

The condition in a market where the supply of goods matches demand, leading to a stable price and quantity for the good or service.

S And D Curves

In economics, the supply and demand curves which graphically represent the relationship between the quantity of goods that producers are willing to sell and consumers are willing to buy at different price levels.