In General, MNCs Probably Prefer to Use ____ Foreign Debt

question 50

Multiple Choice

In general, MNCs probably prefer to use ____ foreign debt when their foreign subsidiaries are subject to ____ local interest rates.

• A) more; low
• B) more; high
• C) less; low
• D) more; high AND less; low
• E) None of these are correct.

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Definitions:

Compound Interest

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Future Value

An estimated future value of a present asset, projected by applying an anticipated growth rate over time.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Compounded Quarterly

A method of calculating interest where the interest is added to the principal amount every quarter, leading to interest being earned on interest.