The cash-and-carry strategy consists of all of the following simultaneous trades except A) borrow euros today using a one-year loan with the interest rate r_€. B) exchange the euros for dollars today at the spot exchange rate S $/€. C) purchase a forward contract to convert $ to €. D) invest the dollars today for one year at the interest rate r_$.

Question

Quizplus · Accepted Answer

The cash-and-carry strategy involves borrowing in one currency, exchanging it for another, investing it, and then entering into a forward contract to convert the invested currency back to the original currency at a predetermined exchange rate. Option C involves purchasing a forward contract to convert $ to € and is not a part of the cash-and-carry strategy. Therefore, it is the best choice among the given options.

The Cash-And-Carry Strategy Consists of All of the Following Simultaneous