A ________ occurs when two business firms in separate countries arrange to borrow each other's currency for a specified period of time.
A) natural hedge loan
B) forward loan
C) currency switch loan
D) back-to-back loan

Question

Quizplus · Accepted Answer

A back-to-back loan is a currency exchange agreement between two separate entities in which one party lends the other party an equivalent amount of their currency. The loan is typically made for a specific period of time and at a predetermined interest rate. The two entities then simultaneously enter into an offsetting loan agreement, in which the original borrower lends the original lender an equivalent amount of their currency. This type of loan helps to reduce the risk of fluctuations in currency exchange rates.

A ________ Occurs When Two Business Firms in Separate Countries