In general, MNCs probably prefer to use ____ foreign debt when their foreign subsidiaries are subject to potentially ____ local currencies.
A) more; strong
B) more; weak
C) less; strong
D) less; weak
E) B and D

Question

Quizplus · Accepted Answer

MNCs probably prefer to use more foreign debt when their foreign subsidiaries are subject to potentially weak local currencies. This is because borrowing in a weaker local currency means that the MNCs will need to pay less when they convert the debt back into their stronger home currency. Furthermore, MNCs would also be able to take advantage of potentially lower interest rates in the foreign country.

In General, MNCs Probably Prefer to Use ____ Foreign Debt