Homework answers / question archive / Which of the following two statements is true? S1: In a carry trade, a speculator borrows in the high interest rate currency and deposits the funds in the low interest rate currency

Which of the following two statements is true? S1: In a carry trade, a speculator borrows in the high interest rate currency and deposits the funds in the low interest rate currency

Finance

Share With

Which of the following two statements is true? S1: In a carry trade, a speculator borrows in the high interest rate currency and deposits the funds in the low interest rate currency. S2: In a carry trade, the speculator’s expected profit decreases if the low interest rate currency appreciates against the high interest rate currency.

A. Both statements are correct

B. S1 is correct but S2 is false

C. Both statements are false

D. S2 is correct but S1 is false