Some large companies based in Latin American countries could borrow funds (through issuing bonds or borrowing from U.S. banks) at an interest rate that would be substantially less than the interest rates in their own countries. Assuming that they are perceived to be creditworthy in the United States, why might they still prefer to borrow in their local countries when financing local projects (even if they incur interest rates of 80 percent or more)?

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 18, Problem 3ST
Textbook Problem

Some large companies based in Latin American countries could borrow funds (through issuing bonds or borrowing from U.S. banks) at an interest rate that would be substantially less than the interest rates in their own countries. Assuming that they are perceived to be creditworthy in the United States, why might they still prefer to borrow in their local countries when financing local projects (even if they incur interest rates of 80 percent or more)?

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