Why is this strategy risky

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A Mexican firm decides to issue Yankee bonds in the U.S. The bonds are denominated in U.S. dollars, but the Mexican firm will need to convert Mexican Pesos into Dollars at each coupon date in order to pay the required interest on the bonds. The bonds have a lower interest rate (in MP-terms) than would be the case if they were issued in the firm’s home market of Mexico. Why is this strategy risky (explain)?

Reference no: EM13965865

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