If the foreign currency is expected to depreciate:
A) a borrower is more likely to borrow foreign currency, than if the foreign currency were expected to appreciate
B) a borrower is less likely to borrow foreign currency, than if the foreign currency were expected to appreciate
C) a borrower is more likely to borrow domestic currency, than if the foreign currency were expected to appreciate
D) a borrower will definitely borrow domestic currency rather than foreign currency

Question

Quizplus · Accepted Answer

If a foreign currency is expected to depreciate, borrowing in that currency can be advantageous because the borrower will repay the loan with a currency that is worth less, effectively reducing the cost of the loan in terms of the borrower's domestic currency.

If the Foreign Currency Is Expected to Depreciate