Describe a situation in which an investor might be able to benefit from the carry trade....

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Describe a situation in which an investor might be able to benefit from "the carry trade." Your countries can be actual or hypothetical. Briefly walk through the steps so I can visualize that you understand the process. Now, when you get to the end of your trade (let's say, two years after you started) what would have to happen to the exchange rate for the currency in which you are borrowing to potentially "spoil" the profit you hope to earn from this activity? In other words, would that country's currency have to appreciate or depreciate? [Yes, I realize that we have never discussed currency appreciation or depreciation but do you think your future supervisor is always going to assign tasks that you have done before? 10 points.] Describe a situation in which an investor might be able to benefit from "the carry trade." Your countries can be actual or hypothetical. Briefly walk through the steps so I can visualize that you understand the process. Now, when you get to the end of your trade (let's say, two years after you started) what would have to happen to the exchange rate for the currency in which you are borrowing to potentially "spoil" the profit you hope to earn from this activity? In other words, would that country's currency have to appreciate or depreciate? [Yes, I realize that we have never discussed currency appreciation or depreciation but do you think your future supervisor is always going to assign tasks that you have done before? 10 points.]

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An investor may benefit from the carry trade strategy when the interest rate in one country is signi... View the full answer