If an MNC borrows in a foreign currency and the value of that currency appreciates during the term of the loan:
A)the MNC will not be affected because its obligations are established when the loan is made.
B)the MNC can cancel the loan and refund the proceeds of the loan.
C)the MNC will have to repay the principle and interest of the loan in a more valuable currency.
D)the lender will have the option of canceling the loan.

Question

Quizplus · Accepted Answer

If the value of the foreign currency appreciates during the term of the loan, the MNC will have to repay the principle and interest in a more valuable currency. This can increase the cost of the loan significantly and impact the MNC's financial performance. The MNC cannot cancel the loan and refund the proceeds just because the value of the currency has appreciated. The lender also does not have the option of cancelling the loan arbitrarily. Therefore, the correct answer is C.

If an MNC Borrows in a Foreign Currency and the Value