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[ Related to Solved Problem 5 . 2 A ] An article on the American Express website observes that often, an interest carry trade involves
Related to Solved Problem A An article on the American Express website observes that "often, an interest carry trade involves maturity mismatch, since longerterm lending typically carries higher interest rates than shortterm."
How might you be able to make a profit from the fact that longterm interest rates are typically higher than shortterm interest rates?
Part
A
By borrowing short term and investing the funds long term.
B
By purchasing more longterm securities than shortterm securities
C
By purchasing more shortterm securities than longterm securities
D
By borrowing long term and investing the funds short term.
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