If the cost of borrowing funds is less than the interest earned on securities held:
A) Dealers take a long position
B) The spread on the sale of the securities will be positive
C) Carry income is positive
D) Dealers liquidate their portfolios
E) None of the above

Question

Quizplus · Accepted Answer

When the cost of borrowing is less than the interest earned on securities, the carry income, which is the difference between the interest earned and the cost of borrowing, is positive.

If the Cost of Borrowing Funds Is Less Than the Interest