As the financing of a foreign project by the parent ____ relative to the financing provided by the subsidiary, the parent's exchange rate exposure ____.
A)increases; decreases
B)decreases; increases
C)increases; increases
D)none of the above

Question

Quizplus · Accepted Answer

When the parent company increases its financing of a foreign project relative to the subsidiary's financing, both the parent's investment in the foreign country and its exposure to exchange rate fluctuations increase. This is because a larger portion of the project's capital is now subject to potential gains or losses from currency value changes.

As the Financing of a Foreign Project by the Parent