Euromarket investment and fund raising A U.S.-based multinational company has two subsidiaries, one in Mexico (local currency, Mexican peso, MP) and one in Japan (local currency, yen, ). Forecasts of business operations indicate the following short-term financing position for each subsidiary (in equivalent U.S. dollars):

Mexico:$89 million excess cash to be invested (lent)

Japan: $62 million funds to be raised (borrowed)

The management gathered the following data: Determine the effective interest rates for all three currencies in both the Euromarket and the domestic market; then indicate where the funds should be invested and raised. (Note: Assume that because of local regulations, a subsidiary is not permitted to use the domestic market of any other subsidiary.)

(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Item Spot exchange rates Forecast percentage change Interest rates Nominal Euromarket Domestic Effective Euromarket Domestic US $ 4.03% 3.78% Currency MP MP11.64/US$ -2.95% 6.21% 5.91% 108.52/US$ + 1.46% 1.96% 2.18%