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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
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, W). Forecasts of business operations indicate the following short-term financing position for each subsidiary (in equivalent U.S. dollars): Mexico: $83 million excess cash to be invested (lent) Japan: $68 million funds to be raised (borrowed) The management gathered the following data: E. Determine the effective interest rates for all three currencies in both the Euromarket and the domestic market; then indicate where the funds should be invested and raised. (Note: Assume that because of local regulations, a subsidiary is not permitted to use the domestic market of any other subsidiary.) The effective interest rate in the Euromarket for the US$ is % (Round to two decimal places.) USS \ Currency MP MP11.59/US$ -2.98% 108.24/US$ + 1.48% Item Spot exchange rates Forecast percentage change Interest rates Nominal Euromarket Domestic Effective Euromarket Domestic 4.01% 3.79% 6.23% 5.93% 2.04% 2.13% | 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, W). Forecasts of business operations indicate the following short-term financing position for each subsidiary (in equivalent U.S. dollars): Mexico: $83 million excess cash to be invested (lent) Japan: $68 million funds to be raised (borrowed) The management gathered the following data: E. Determine the effective interest rates for all three currencies in both the Euromarket and the domestic market; then indicate where the funds should be invested and raised. (Note: Assume that because of local regulations, a subsidiary is not permitted to use the domestic market of any other subsidiary.) The effective interest rate in the Euromarket for the US$ is % (Round to two decimal places.) USS \ Currency MP MP11.59/US$ -2.98% 108.24/US$ + 1.48% Item Spot exchange rates Forecast percentage change Interest rates Nominal Euromarket Domestic Effective Euromarket Domestic 4.01% 3.79% 6.23% 5.93% 2.04% 2.13% |
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