Question

A MNC will borrow less in foreign currencies if its subsidiary is expecting a stronger local currency. This statement is:

a.	true since the cost of borrowing will be higher
b.	false since the cost of borrowing will be lower
c.	probably true or false depending on other factors
d.	none of the above

Answer 1

Multinational corporation will be borrowing lesser in the foreign currency, if it is expecting that the foreign currency is expensive.If, subsidiary of multinational corporation is also expecting that local currency will be strong, it will mean that foreign borrowing for multinational corporation will be expensive

Multinational corporation will be borrowing in higher amount in foreign currency, if it is expecting that foreign currency is cheaper and its subsidiary is expecting that local currency is cheaper because local currency for subsidiary will mean foreign currency for multinational corporation.

So, All the other statements except option (A) are false because they are advocating for otherwise than actual fact.

Correct answer is option (A) TRUE, since the cost of borrowing will be higher.