a. Flagstaff Corp. is a U.S.based firm with a subsidiary in Mexico. It plans to reinvest its earnings in Mexican government securities for the next 10 years since the interest rate earned on these securities is so high. Then, after 10 years, it will remit all accumulated earnings to the United States. What is a drawback of using this approach? (Assume the securities have no default or interest rate risk.)

b. Describe the possible errors involved in assessing country risk. In other words, explain why country risk analysis is not always accurate.

c. Explain why managers of a whollyowned subsidiary may be more likely to satisfy the shareholders of the MNC.

d. What factors should be considered by a U.S. firm that plans to issue a floating rate bond denominated in a foreign currency?