When a US-Based MNC Has a Subsidiary in Mexico That Needs Financing

question 50

Multiple Choice

When a U.S.-based MNC has a subsidiary in Mexico that needs financing, the MNC's exposure to exchange rate risk can be minimized if:

• A) the parent issues dollar-denominated equity and provides the proceeds to the subsidiary.
• B) the parent provides its retained earnings to the Mexican subsidiary.
• C) the subsidiary obtains a dollar-denominated loan from a financial institution.
• D) the subsidiary obtains a peso-denominated loan from a financial institution.

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Definitions:

ATP

Adenosine triphosphate, a molecule that stores and transfers energy within cells, crucial for muscle contraction, nerve impulse propagation, and chemical synthesis.

Active Transport

A cellular process that uses energy to move molecules across cell membranes against their concentration gradient.

Facilitated Diffusion

A process of passive transport, aided by transport proteins, that allows molecules to cross the cellular membrane along the concentration gradient without energy expenditure.

Concentration Gradient

The gradual difference in the concentration of solutes in a solution between two regions, leading to the movement of substances from high to low concentration.