To Avoid Exchange Rate Risk When Borrowing a Foreign Currency

question 42

True/False

To avoid exchange rate risk when borrowing a foreign currency, an MNC could hedge its position by using interest rate swaps.

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Definitions:

Additional Paid-In Capital

The amount of money paid by investors for shares of stock above their par value; it is a measure of the excess investment made by shareholders.

Journal Entries

Recorded business transactions in the accounting records of a company, following the double-entry bookkeeping principle.

Note Payable

A written agreement whereby the borrower agrees to pay a certain sum of money to the lender at a future date.

Land Costing

The total expense incurred to acquire land, including purchase price, closing costs, and any other costs to prepare the land for use.