Please respond to the following:
- From the Activity, determine critical reasons why a multinational corporation might decide to borrow money from a country such as Brazil, where interest rates are high, rather than from a country like Switzerland, where interest rates are low. Provide support for your rationale.
Regularly, it usually is enticing for a multinational enterprise to acquire cash from economies with low premiums. Be that as it may, this is not a suitable procedure. This strengthens the more significant part of the multinational companies to obtain cash from nations with high financing costs instead of the nations with low loan costs. There are exists different vital reasons that clarify why the multinational organization may choose to obtain from high intrigues economies, for example, Brazil. To start with, the level of relative swelling rates noteworthy influences the choice to acquire in economies with higher loan fees. Since an organization may spare from getting from a nation with lower loan costs. On the other hand, the relative expansion rates could make the funds acknowledge in future creating an increment in the yearly hobbies and vital installments of the advances after some time. In this way, the lower loan cost could be more than counterbalanced by misfortunes from the cash appreciation. The relative expansion rates, as a rule, expand the level of relative loan costs.
The rate of swelling in the outside nations is another key reason that has noteworthy ramifications for multinational money-related choices. It is clear that the swelling rates will significantly impact the future creation costs both at home and abroad. Obtaining from nations with high loan fees offers in guaranteeing some assistance with stabling productivity in future. This is because the adjustments in the relative expansion rates in other outside countries will not antagonistically influence the capacity of the multinational enterprise to reimburse its obligations. Another critical element is the trade rates between the outside coinage and the residential money of firm. In the event that outside money will normal, deteriorate, or acknowledge against the residential coin at a rate around equivalent to the sum by which the swelling rate surpasses or is not precisely the U.S rate, the cash will, by and large, acknowledge. Accordingly, the impacts of swelling, loan fees and trade rates are critical explanations behind the multinational partnerships choosing to get from nations with high financing costs as opposed to nations with low financing cost.
- From the scenario, select two (2) potential international markets in which TFC may wish to do business. Compare the currency markets of the two (2) countries you have chosen with that of the U.S. dollar. Based on currency considerations only, recommend whether TFC should expand to the international markets that you have chosen.