An MNC is attempting to reduce its economic exposure by financing a portion of its business with loans in the foreign currency. If the foreign currency weakens, the MNC will need ____ of the foreign currency to cover the loan payment, while the MNC's foreign currency revenues will convert to ____ dollars.

Question

Quizplus · Accepted Answer

If the foreign currency weakens, the MNC's foreign currency revenues will convert to fewer dollars, meaning they will have less money to cover the loan payment. However, since the loan is in a weaker foreign currency, the MNC will need fewer of that currency to cover the loan payment. Therefore, the best choice is C.

An MNC Is Attempting to Reduce Its Economic Exposure by Financing