STEP 2 of 5 Suppose that California Co., a U.S. based MNC, seeks to capitalize a difference in interest rates between euros and British pounds via the use of a carry trade. In particular, after 1 month, funds invested in euros will yield a 0.50% percent return, while funds invested in pounds will yield a return of 2.00% percent. Currently the spot rate of the British pound is $1.00 while the spot rate of the euro is $0.80. In other words, the pound is worth 1.25 euros. California Co. expects these spot rates to remain constant over the next month. California Co. has a total of 600,000 pounds after converting their own funds, as well as their borrowed euros, to pounds. If California Co. Invests these pounds, after 1-month it will have a total of pounds. Grade Ship 2