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.