For the average individual investor,the gap between the short-term interest rate at which he can borrow and the rate at which he could invest in long-term bonds is likely to be
A) small or even negative, making the profitability of an interest -carry-trade strategy unlikely.
B) small or even negative, making the profitability of an interest -carry-trade strategy likely.
C) high, making the profitability of an interest -carry-trade strategy unlikely.
D) high, making the profitability of an interest -carry-trade strategy likely.

Question

Quizplus · Accepted Answer

The average individual investor is unlikely to have access to low short-term interest rates, so the gap between the short-term interest rate at which they can borrow and the rate at which they could invest in long-term bonds is likely to be small or even negative. This makes the profitability of an interest-carry-trade strategy unlikely.

For the Average Individual Investor,the Gap Between the Short-Term Interest