what are the reasons why a multinational corporation might decide to borrow in a
ID: 2731547 • Letter: W
Question
what are the reasons why a multinational corporation might 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. Provide support for your rationale. *select two (2) potential international markets in which TFC may wish to do business. Compare the currency markets of the two (2) countries you have chosen with that of the U.S. dollar. Based on currency considerations only, recommend whether or not TFC should expand to the international markets that you have chosen.
Explanation / Answer
A multinational corporation might 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. is that due to relative inflation rates, there is probability of Swiss franc appreciating in the future,causing the dollar cost of annual interest and principal payments on Swiss debt to rise over time. as a result advantages arising from lower interest rate being offset by losses from currency appreciation.however in Brazil, inspite of interest rates being very high, because future depreciation of the Brazilian real could make such borrowing end up being relativily inexpensive.
Two (2) potential international markets in which TFC may wish to do business.would be Switzerland, and Brazil as losses arising due to Swiss Franc appreciating in future against the dollar would be offset by gains arising due future depreciation of the Brazilian Real against the dollar Based on the above would recommend TFC should expand to the above international markets
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