What financial instruments allow firms to obtain long-term foreign currency financing at lower cost than they can by borrowing directly?
A) Currency swaps
B) Forward rates
C) Foreign currency options
D) Future contracts

Question

Quizplus · Accepted Answer

Currency swaps allow firms to obtain long-term foreign currency financing at lower cost than they can by borrowing directly, as they involve an exchange of interest payments in different currencies, rather than a physical exchange of principal. This can help firms to manage and mitigate currency risk, as well as reducing the cost of financing. The other options listed (forward rates, foreign currency options, and future contracts) do not necessarily provide long-term financing or lower costs than direct borrowing.

What Financial Instruments Allow Firms to Obtain Long-Term Foreign Currency