What is a key disadvantage of using this strategy that may


Fairfield Corp., a US firm, recently established a subsidiary in a less developed country that consistently experiences an annual inflation rate of 80% or more. The country does not have an established stock market, but loans by local banks are available with a 90% interest rate in the host country. What is a key disadvantage of using this strategy that may cause Fairfield to be no better off than if it paid the 90% interest rate?

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Financial Management: What is a key disadvantage of using this strategy that may
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