Logan could also borrow euros at an interest rate that is lower than the U.S. or British rate. The values of the euro and pound tend to move in the same direction against the dollar, although not always by the same degree. Would borrowing euros to support the British joint venture result in more exposure to exchange rate risk than borrowing pounds? Would it result in more exposure to exchange rate risk than borrowing dollars?

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 20, Problem 2SBD
Textbook Problem

Logan could also borrow euros at an interest rate that is lower than the U.S. or British rate. The values of the euro and pound tend to move in the same direction against the dollar, although not always by the same degree. Would borrowing euros to support the British joint venture result in more exposure to exchange rate risk than borrowing pounds? Would it result in more exposure to exchange rate risk than borrowing dollars?

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