535 Ch. 18: #3 & 6
PLEASE EXPLAIN IN DETAIL
3. Exchange Rate Effects
a. Explain the difference in the cost of financing with foreign currencies during a strong-dollar period versus a weak-dollar period for a U.S. firm.
6. Financing That Reduces Exchange Rate Risk Kerr, Inc., a major U.S. exporter of products to Japan, denominates its exports in dollars and has no other international business. It can borrow dollars at 9 percent to finance its operations or borrow yen at 3 percent. If it borrows yen, it will be exposed to exchange rate risk. How can Kerr borrow yen and possibly reduce its economic exposure to exchange rate risk?