To avoid exchange rate risk when borrowing a foreign currency, an MNC could hedge its position by using interest rate swaps.

Name: To avoid exchange rate risk when borrowing a foreign currency, an MNC could hedge its position by using interest rate swaps.
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Question

Quizplus · Accepted Answer

Interest rate swaps are used to manage interest rate risk, not exchange rate risk. To hedge against exchange rate risk, an MNC would use currency forwards, futures, options, or swaps, not interest rate swaps.

To Avoid Exchange Rate Risk When Borrowing a Foreign Currency