Question

ABB Bank is a financial corporation located in England and uses euro as its official currency. The company borrows 1 million U.S. dollars from a bank based in United States. ABB will be at a disadvantage if ____.

Answer 1

The U.S. dollar depreciates against the Euro

Step-by-step explanation:

Currency depreciation occurs due to factors like interest rate differentials, economic fundamentals of political instability. It is the loss in value of a country's currency in relation to one or more foreign reference currencies, and it usually occurs in a type of exchange rate regime where the value of the currency can fluctuate as a result of events in foreign exchange markets. If the US dollar depreciates against the Euro, the money borrowed by ABB bank will reduce in worth, there by increasing the amount to be paid back.