A risk-averse firm would prefer to borrow ____ when the expected financing costs in a foreign country are similar to the costs in the local country.

Question

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A risk-averse firm would prefer to borrow locally when the expected financing costs in a foreign country are similar to the costs in the local country. This is because borrowing locally reduces the firm's exposure to foreign exchange risk, which can be unpredictable and potentially lead to significant losses. By borrowing locally, the firm can avoid potential fluctuations in exchange rates and ensure a predictable cost of borrowing.

A Risk-Averse Firm Would Prefer to Borrow ____ When the Expected