UK-based MNCs whose foreign subsidiary generates large earnings may be able to offset exposure to exchange rate risk by issuing bonds denominated in the subsidiary's local currency.

Question

Quizplus · Accepted Answer

Issuing bonds in the subsidiary's local currency can create a natural hedge, as the debt obligations in that currency can offset the exchange rate risk associated with the subsidiary's earnings.

UK-Based MNCs Whose Foreign Subsidiary Generates Large Earnings May Be