Which of the following is a scenario under which a U.S.-based MNC probably would not consider short-term foreign financing?
A) Canadian dollars offer a lower interest rate than is available in the United States and are expected to appreciate over the maturity of the loan.
B) Australian dollars offer a lower interest rate than is available in the United States and are expected to depreciate over the maturity of the loan.
C) The MNC has net receivables in British pounds.
D) Canadian dollars offer a lower interest rate than is available in the United States and are expected to appreciate over the maturity of the loan AND the MNC has net receivables in British pounds.
E) None of these are correct.

Question

Quizplus · Accepted Answer

A U.S.-based MNC would likely avoid short-term foreign financing in a scenario where the foreign currency (in this case, Canadian dollars) offers a lower interest rate but is expected to appreciate over the maturity of the loan. This appreciation could increase the repayment amount in USD terms, negating the benefit of the lower interest rate.

Which of the Following Is a Scenario Under Which a U.S.-Based