When an MNC borrows in two foreign currencies with lower interest rates than the U.S. rate, the portfolio will have a higher effective financing rate than a loan in U.S. dollars if both currencies depreciate simultaneously against the dollar.
A)True
B)False

Question

Quizplus · Accepted Answer

When an MNC borrows in foreign currencies with lower interest rates than the U.S. rate, it aims to reduce its financing costs. If both currencies depreciate against the dollar, the MNC benefits because it will cost less in dollar terms to repay the loans, potentially leading to a lower effective financing rate compared to borrowing in U.S. dollars, not higher.

When an MNC Borrows in Two Foreign Currencies with Lower