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What do you expect to be the design of the carry trade

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Reference no: EM132948819

Question - An asset manager decided to implement a 6-month carry trade strategy between currency A and B. The 6-month interest rates of currencies A and B were 8% and 3% respectively at the initial moment of the strategy implementation. At that time, the exchange rate between currency A and B was 3: each unit of currency A buys 3 units of currency B. The amount invested by the asset manager in this carry trade strategy was 500.000 in terms of currency A.

-What do you expect to be the design of the carry trade strategy that this asset manager has implemented? Discuss.

-At the end of the 6-month period, the exchange rate between currency A and B was 2.2. What is the final result of this carry trade strategy for the asset manager? Discuss.

Reference no: EM132948819

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