Interest Rate Swap Transactions May Be Used by a Multinational

question 60

Multiple Choice

Interest rate swap transactions may be used by a multinational corporation as part of a funding strategy to:

• A) lower the cost of borrowing, using a comparative advantage in a particular debt market.
• B) spread debt issues across a range of currencies.
• C) diversify funding sources across a range of debt markets.
• D) all of the given answers.

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Definitions:

Replacement Chain

A capital budgeting decision tool that compares different projects or investments with unequal lifespans by calculating their equivalent annual costs or benefits.

Profitability Index

A financial metric used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment.

Discount Rate

The discount rate utilized in determining the present value of future cash flows through discounted cash flow (DCF) analysis.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment by calculating the present value of expected cash flows minus the initial cost.