An investor sells Japanese yen which is yielding a low interest rate and uses the proceeds to buy Swiss francs that yield a higher interest rate.Which term best describes the investor's actions?
A) forward discount spread
B) interbank transaction
C) strike price option
D) carry trade

Question

Quizplus · Accepted Answer

The investor is engaging in a carry trade, which involves borrowing in a lower-yielding currency and investing in a higher-yielding currency to capture the interest rate differential.

An Investor Sells Japanese Yen Which Is Yielding a Low