You Are the Debt Manager for a U

question 100

Multiple Choice

You are the debt manager for a U.S.-based multinational.You need to borrow €100,000,000 for five years.You can either borrow the €100,000,000 directly in Germany or borrow dollars in the U.S.and enter into a combined interest rate and currency swap with a swap bank.One risk that you face by using the swap that you do not face by borrowing euros directly is

• A)exchange rate risk.
• B)sovereign risk.
• C)credit risk.
• D)interest rate risk.

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Definitions:

Louis Vuitton

A luxury fashion brand founded in France, known for its leather goods, high-end clothing, and accessories, characterized by distinctive designs and craftsmanship.

Assets

Economic resources or valuable items owned by individuals or organizations that have potential or actual value and can contribute to wealth.

Wealth

An abundance of valuable resources or material possessions, or the control of such assets.

Stocks

Financial instruments that represent an ownership share in a company, granting the holder a claim on part of the company's assets and profits.