Should Interest Rate Parity Prevent MNCs from Investing in Foreign Currencies? Point Yes. Currencies with high interest
Question:
Point Yes. Currencies with high interest rates have large forward discounts according to interest rate parity. To the extent that the forward rate is a reasonable forecast of the future spot rate, investing in a foreign country is not feasible.
Counter-Point No. Even if interest rate parity holds, MNCs should still consider investing in a foreign currency. The key is their expectations of the future spot rate. If their expectations of the future spot rate are higher than the forward rate, the MNCs would benefit from investing in a foreign currency.
Who Is Correct? Use the Internet to learn more about this issue. Which argument do you support? Offer your own opinion on this issue.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
The key is whether the MNC can more accurately predi...View the full answer
Answered By
Akshay Agarwal
I am a Post-Graduate with a specialization in Finance. I have been working in the Consulting industry for the past 8 years with a focus on the Corporate and Investment Banking domain. Additionally, I have been involved in supporting student across the globe in their academic assignments and always strive to provide high quality support in a timely manner. My notable achievements in the academic field includes serving more than 10,000 clients across geographies on various courses including Accountancy, Finance, Management among other subjects. I always strive to serve my clients in the best possible way ensuring high quality and well explained solutions, which ensures high grades for the students along-with ensuring complete understanding of the subject matter for them. Further, I also believe in making myself available to the students for any follow-ups and ensures complete support and cooperation throughout the project cycle. My passion in the academic field coupled with my educational qualification and industry experience has proved to be instrumental in my success and has helped me stand out of the rest. Looking forward to have a fruitful experience and a cordial working relationship.
179+ Reviews
294+ Question Solved
Related Book For 
Question Posted:
