Asked by Tristen Adams on May 26, 2024
Verified
Reducing the amount of borrowing denominated in the currency of the foreign subsidiary is a method of reducing the long-run exposure risks of foreign exchange.
Foreign Subsidiary
A foreign subsidiary is a company partly or wholly owned by another company, known as the parent company, and is based in a country other than the one where the parent company is located.
Exchange Risks
The potential for investors to experience losses due to fluctuations in currency exchange rates.
- Understand strategies for reducing long-run exposure risks in foreign exchange.
Verified Answer
FP
Foram PanchalMay 31, 2024
Final Answer :
False
Explanation :
Reducing borrowing in the currency of the foreign subsidiary might actually increase long-run exposure risks, as borrowing in the local currency can serve as a natural hedge against currency fluctuations.
Learning Objectives
- Understand strategies for reducing long-run exposure risks in foreign exchange.
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