Chapter 18: Long-Term Debt Financing

Flashcards covering key vocabulary and concepts from long-term debt financing in international financial management.

Debt Denomination Dilemma

The challenge faced by MNCs when choosing the currency denomination for long-term debt financing.

Currency Swaps

Financial agreements where two parties exchange cash flows in different currencies to manage debt.

Parallel Loans

A financing arrangement where two subsidiaries borrow from each other's parent companies.

Fixed-Rate Debt

Debt with an interest rate that remains constant throughout the life of the loan.

Floating-Rate Debt

Debt with an interest rate that can vary over time based on market conditions.

Yield Curve

A graph that shows the relationship between interest rates and different maturity dates for debt.

Debt Maturity Decision

The process of selecting the length of time until a debt obligation is due.

Interest Rate Swaps

Contracts to exchange fixed rate payments for floating rate payments, or vice versa, to manage interest rate risk.

Debt Maturity

The length of time before the principal amount of a loan must be repaid.

Hedging

A risk management strategy to reduce potential losses from fluctuations in currency exchange rates or interest rates.