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d to Solved Problem 8.3] Borrowing at a low interest rate in one currency to lend at a higher interest rate in another currency is
d to Solved Problem 8.3] Borrowing at a low interest rate in one currency to lend at a higher interest rate in another currency is sometimes called a "carry Relate trade." An article in the New York Times observes that "China has been at the forefront of this so-called carry trade, in which corporations and countries tap dollar -based lenders and then invest the proceeds in higher-yielding assets denominated in local currencies. Source: Landon Thomas, Jr"A Big Bet That China's Currency wil Devalue Further," New York Times, September 23, 2015 In this scenario, which of the following would be considered 'higher yielding assets denominated in local currencies"? O A. High-rate U S bonds purchased with Chinese yuan. O B. U.S real estate purchased with U.S. dollars C. High-performing Chinese commodities purchased with US dollars O D. U.S real purchased with Chinese yuan As long as Chinese inerest rales remain low and the yuan remairoginvestons ill kely pales in the Ueand the value of the uan falls profits will likely fall Investors engaging in this cary trade would ikelycause la decrease in the value of the Chinese yuan in exchange for US dolars AsUS .interest rates rise and investors shift away from riskier investments to safer markets, t would ikely cause an increase in the value for the Chinese yuan in exchange for U S dollars
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