When a U.S. firm borrows a foreign currency and has no offsetting position in this currency, it will incur an effective financing rate that is always above the ____ if the currency ____.
A) foreign currency's interest rate; appreciates
B) foreign currency's interest rate; depreciates
C) domestic interest rate; depreciates
D) domestic interest rate; appreciates

Question

​When a U.S. firm borrows a foreign currency and has no offsetting position in this currency, it will incur an effective financing rate that is always above the ____ if the currency ____.
A) ​foreign currency's interest rate; appreciates
B) ​foreign currency's interest rate; depreciates
C) ​domestic interest rate; depreciates
D) ​domestic interest rate; appreciates

Quizplus · Accepted Answer

When a U.S. firm borrows in a foreign currency and the currency appreciates, the firm will have to pay back more in terms of its own currency, effectively increasing the cost of borrowing above the foreign currency's interest rate.

​When a US

When a US