Question: 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. The

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. 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=61 and $1.30 =$1 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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