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trade with a hedge O when an investment abroad is closed out and the investor returns to their home currency O when a carry trader borrows in the financing currency and invests in the home currency QUESTION 7 The balance of payments theory includes: The profit opportunity from arbitrage across international markets Cross account (FA to CA and vice versa) re-balancing due to arbitrage opportunities arising from changes in relative prices. The re-equilibration of the fx market due to sixoply and demand across the currency pair Current account and financial account re-balancing due to relative prices QUESTION 8 If a country has a financial account deficit, that country's stock of international indebtedness is less than its investments from abroad