Currency carry trade (Points : 3.5)

involves buying a currency that has a low rate of interest and funding the purchase by borrowing in a currency with high rates of interest without any hedging. involves buying a currency that has a high rate of interest and funding the purchase by borrowing in a currency with low rates of interest, with forward hedging (i.e., using currency forward contracts to hedge currency movement risk). involves buying a currency that has a high rate of interest and funding the purchase by borrowing in a currency with low rates of interest with forward hedging, without any hedging. involves buying a currency that has a low rate of interest and funding the purchase by borrowing in a currency with high rates of interest, with forward hedging (i.e., using currency forward contracts to hedge currency movement risk).