1 answer

The US interest rate is i$ = 3 % for the next year and the UK...

Question:

The US interest rate is i$ = 3 % for the next year and the UK interest rate is i£ = 6%. If I borrow money in UK and invest in US for the next year, uncovered IRP (carry trade) suggests that I will make money if and only if:

Answers

If we borrow money from the UK we will have money in the form of the euro which is expensive as compared to the dollar (1 Eur = 0.92 dollar) and if the interest rate is 3% for the next year in the US still we can't make money as Dollar is weaker then euro, we can only make money if the dollar will become stronger then euro in the Forex market.

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