Generally, the financing costs associated with a foreign currency-denominated bond will be ____ volatile than the financing costs of a domestic bond because of ____.

Question

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Financing costs of a foreign currency-denominated bond will be more volatile because of exchange rate movements. As the exchange rate changes, the value of the bond may increase or decrease, which affects the financing costs for investors. This makes the financing costs of a foreign currency-denominated bond more unpredictable and volatile compared to a domestic bond.

Generally, the Financing Costs Associated with a Foreign Currency-Denominated Bond