Question: A trader puts on a so-called carry trade position (borrowing using short-term financing to purchase longer-term instruments). The carry trade will earn the highest return

A trader puts on a so-called carry trade position (borrowing using short-term financing to purchase longer-term instruments). The carry trade will earn the highest return if

  • A. long-term interest rates rise

  • B. short-term interest rates rise

  • C. short-term interest rates fall

  • D. long-term interest rates fall

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