麻烦老师帮忙理解下这道题

问题如下：

Foreign exchange (FX) carry trades have been profitable in short and medium time periods because:

选项：

A.low-yield currencies reflect a more unstable economy. B.the return to the trader consists of credit risk and currency appreciation/depreciation.
C.currencies do not depreciate to levels predicted by interest rate differentials.

解释：

Incorrect because it is the high-yield currencies that reflect an unstable economy. The yields in higher interest rate countries reflect a risk premium due to a more unstable economy, while low-yield currencies represent less risky markets.

Incorrect because traders minimize credit risk by using highly rated government debt to execute the trade, thus credit risk is minimized. The carry trader’s return consists of the intermarket yield spread, the currency appreciation/depreciation, and the foreign investment appreciation/depreciation. Typically a carry trade is executed using an investment in highly rated government debt so as to mitigate credit risk.

Correct because when the high-yield currency does not depreciate to the level predicted by the interest rate differentials it provides a profit opportunity on the returning currency exchange. The evidence suggests that uncovered interest rate parity does not hold over short and medium time periods. Studies have generally found that high-yield currencies, on average, have not depreciated and low-yield currencies have not appreciated to the levels predicted by interest rate differentials.