In the international context, the effective interest rate is equal to the nominal rate plus (or minus) any forecast appreciation (or depreciation) of a foreign currency relative to the currency of the MNC parent.

Question

Quizplus · Accepted Answer

This statement is true. The effective interest rate takes into account both the nominal interest rate as well as any expected changes in exchange rates between the currency of the parent company and a foreign currency. This can impact the overall return or cost of borrowing for the multinational corporation.

In the International Context, the Effective Interest Rate Is Equal