The risk of investing in foreign countries can be greatly minimized by making intercompany loans that are to be repaid in U.S. dollars as opposed to making investments in common stocks of the foreign unit.

Question

Quizplus · Accepted Answer

Intercompany loans repaid in U.S. dollars can mitigate currency risk but do not address other risks associated with investing in foreign countries, such as political risk, economic instability, or changes in regulatory environments. Investing in common stocks of a foreign unit also exposes investors to market risk, which is not necessarily mitigated by the currency in which loans are repaid.

The Risk of Investing in Foreign Countries Can Be Greatly