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: $90 million excess cash to be invested (lent) Japan: $61 million funds to be raised (borrowed) The management gathered the following data: Determine the effective interest rates for all three currencies in both the Euromarket and the domestic market; then indicate where the funds should be invested and raised. (Note: Assume that because of local regulations, a subsidiary is not permitted to use the domestic market of any other subsidiary.) The effective interest rate in the Euromarket for the US$ is 2.97 %. (Round to two decimal places.) Data Table x (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) US $ Currency MP MP11.59/US$ - 3.01% 108.54/US$ + 1.46% Item Spot exchange rates Forecast percentage change Interest rates Nominal Euromarket Domestic Effective Euromarket Domestic 4.01% 3.73% Enter your answer in the answer box and then click Check Answer. 6.17% 1.96% 5.85% 2.11% Activate Windows Go to Settings to activate Windows parts remaining 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: $90 million excess cash to be invested (lent) Japan: $61 million funds to be raised (borrowed) The management gathered the following data: Determine the effective interest rates for all three currencies in both the Euromarket and the domestic market; then indicate where the funds should be invested and raised. (Note: Assume that because of local regulations, a subsidiary is not permitted to use the domestic market of any other subsidiary.) The effective interest rate in the Euromarket for the US$ is 2.97 %. (Round to two decimal places.) Data Table x (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) US $ Currency MP MP11.59/US$ - 3.01% 108.54/US$ + 1.46% Item Spot exchange rates Forecast percentage change Interest rates Nominal Euromarket Domestic Effective Euromarket Domestic 4.01% 3.73% Enter your answer in the answer box and then click Check Answer. 6.17% 1.96% 5.85% 2.11% Activate Windows Go to Settings to activate Windows parts remaining
