You execute a carry trade in which you borrow 10000 british, Ask an Expert

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You execute a carry trade in which you borrow 10,000 british pounds and invest in euros. You also use 10,000 of your own money in dollar. The duration of the trade is one year. The interest rates and exchange rates are shown in the following:

Pound interest rate: 4%

Euro interest rate: 6%

Current spot rate: $1.20=1 euro and 1.30 euro=1 british pound

You use the current exchange rates as forecasts for those in one year.

What profit would you expect as a percentage of your own fund?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92653395

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