Other things being equal, firms from a particular home country will engage in more international acquisitions if they expect foreign currencies to ____ against their home currency, and if their cost of capital is relatively ____.
A) appreciate; low
B) appreciate; high
C) depreciate; high
D) depreciate; low

Question

Other things being equal, firms from a particular home country will engage in more international acquisitions if they expect foreign currencies to ____ against their home currency, and if their cost of capital is relatively ____.​
A) ​appreciate; low
B) ​appreciate; high
C) ​depreciate; high
D) ​depreciate; low

Quizplus · Accepted Answer

Firms are more likely to engage in international acquisitions if they expect foreign currencies to appreciate against their home currency because the value of their foreign investments will increase in their home currency terms. Additionally, a relatively low cost of capital makes financing the acquisition cheaper, further incentivizing international acquisitions.

Other Things Being Equal, Firms from a Particular Home Country