When a U.S. firm borrows a foreign currency that is at a fixed exchange rate and has the same interest rate as the U.S. interest rate, the effective financing rate should be the same as if it borrowed dollars.

Question

Quizplus · Accepted Answer

If the foreign currency has the same interest rate as the U.S. interest rate and the exchange rate is fixed, then there should be no difference in the effective financing rate compared to borrowing dollars.

When a US Firm Borrows a Foreign Currency That Is at a at a Fixed