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:

Negligence

The failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation, leading to harm or damage.

Res Ipsa Loquitur

A legal principle that infers negligence from the very nature of an accident or injury, in the absence of direct evidence on how any defendant behaved.

Plaintiff

An individual or entity who initiates a lawsuit against another party in a court of law.

Jurisdiction

The official power to make legal decisions and judgments, often defined by geographic area or type of case.