BUS694 Week 6 Discussion 1 Borrowing Foreign Currency Solution

Question: #315

1. There is some debate on whether Multinational Corporations (MNC’s) increase risk when borrowing foreign currencies. Those in favor of borrowing state that lower costs of financing can be achieved and it improves their ability to compete. Those against state that when an MNC borrows a foreign currency, they are essentially speculating on future exchange rate movements. Choose a side and defend your argument.

2. You are a cash manager of a MNC based in the United States. One of your responsibilities is to gain the highest yield for your treasury cash. Go to Bloomberg and click on a country to review its interest rates. Select a country to invest in for one year. Describe why you chose that country and your expected yield for the next year.

Please include reference page and incite quotes.

Solution: #329

BUS694 Week 6 Discussion 1 Borrowing Foreign Currency Solution

In my view, when an MNC borrows a foreign currency, they are essentially speculating on future exchange rate movement. The cost of borrowing currency depends upon the interest rate prevailing in the market if c...