_____ How can the risk of investing in foreign countries (that is, the risk of not being able to recover one's investment) be greatly minimized?
A) Require the subsidiary to invest in monetary assets.
B) Finance foreign operations with foreign borrowings to the maximum extent possible.
C) Require the subsidiary to maintain monetary assets equal to monetary liabilities.
D) Make intercompany loans that are to be repaid in U.S. dollars as opposed to making investments in common stocks of the foreign units.
E) None of the above.

Question

Quizplus · Accepted Answer

Financing foreign operations with foreign borrowings can minimize risk by matching the currency of the liabilities with the currency of the revenues, thus reducing exchange rate risk.

_____ How Can the Risk of Investing in Foreign Countries