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?

Answer rating: 100% (QA)

To calculate the expected profit as a percentage of your own fund in the carry trade we need to cons... View the full answer