Attempts Do No Harm / 5 8. Carry trade 1. 2. 3. 4. 5. STEP: 1 of 5 Suppose that California Co., a U.S. based MNC, seeks to capitalize a difference in interest rates between euros and British pounds via the use of a carry trade. In particular, after 1 month, funds invested in euros will yield a 0.50% percent return, while funds invested in pounds will yield a return of 2.00% percent. Currently the spot rate of the British pound is $1.00 while the spot rate of the euro is $0.80. In other words, the pound is worth 1.25 euros. California Co. expects these spot rates to remain constant over the next month. pounds. If California Co. borrows If California Co. takes $200,000 of its own funds and converts them to pounds it would have 600,000 euros and converts them to pounds, it will have pounds. Grade Step 1 TOTAL SCORE: 0/5 (to complete this step and unlock the next step)