Question

An American company today invests some of its spare cash in a Hungarian money market account that will earn 8 percent for two months. Which of the following, if it happens during the next two months, would imply that the company will earn less than 8 percent on its investment? Group of answer choices
Group of answer choices
a. Spot and Channel trade
b. Price action trade
c. Swap trade
d. Carry trade

Answer 1

Answer:

None of the options is correct.

Explanation:

A spot trade could be result in higher or lower profits, the also applies to a carry trade. The factor that can make this investment more or less profitable if the current exchange rate between the US dollar and the Hungarian forint. Since the company is investing in Hungarian forints, if it depreciates against the US dollar, the company's profit may decrease or even turn into a loss. On the other hand, if the Hungarian forint appreciates against the US dollar, the company's profits will increase.