When a foreign currency is perceived by a firm to be undervalued, the firm may consider direct foreign investment in that country, as the initial outlay should be relatively low.

Question

Quizplus · Accepted Answer

If a foreign currency is undervalued, it means that the firm's currency is relatively stronger than the host country's currency. This makes the initial outlay for direct foreign investment relatively low, as the firm can get more for their currency in terms of the host country's currency. Therefore, the statement is true.

When a Foreign Currency Is Perceived by a Firm to Be