In case of international capital budgeting, long-term currency risk can be minimized by at least partly financing the foreign investment with a dollar-denominated capital contribution from the parent company rather than in the local capital markets.

Question

Quizplus · Accepted Answer

Financing a foreign investment with a dollar-denominated capital contribution from the parent company does not minimize long-term currency risk; it actually exposes the investment to currency risk if the local currency depreciates against the dollar.

In Case of International Capital Budgeting, Long-Term Currency Risk Can