Which of the following is a drawback of the Eurocurrency market?

Question

Quizplus · Accepted Answer

The Eurocurrency market has two drawbacks. In an unregulated system, such as the Eurocurrency market, the probability of a bank failure that would cause depositors to lose their money is greater. Thus, the lower interest rate received on home-country deposits reflects the costs of insuring against bank failure. Second, borrowing funds internationally can expose a company to foreign exchange risk. Consequently, many companies borrow funds in their domestic currency to avoid foreign exchange risk, even though the Eurocurrency markets may offer more attractive interest rates.

Which of the Following Is a Drawback of the Eurocurrency