Why might a multinational corporation decide to borrow in a country such as Brazil, where interest rates are high, rather than in a country like Switzerland, where interest rates are low?

Category:

Why might a multinational corporation decide to borrow in a country such as Brazil, where interest rates are high, rather than in a country like Switzerland, where interest rates are low?

0
0

Why might a multinational corporation decide to borrow in a country such as Brazil, where interest rates are high, rather than in a country like Switzerland, where interest rates are low?

Explanation & AnswerSolution by a verified expert

Explanation

Over the long run, due to high interest rates, the Brazilian currency will depreciate against the currency where the multinational company has its head office. Over the duration of debt, the Brazilian currency depreciation will make borrowing inexpensive. But if the company decides to borrow from Switzerland, where the interest rates are low, the currency appreciation of Swiss currency over the long run will likely make borrowing expensive.

Verified Answer

Long run currency depreciation will offset high interest costs.

Purchase this answer to view it. $5
Login/Sign up for free, load your wallet instantly using PayPal or cards and purchase this solution to view it.


Get Help With Your Assignments

Place your order now and get a quality plagiarism-free paper via email.

Write My Paper For Me