Euromarket investment and fund raisingA 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: $80 million excess cash to be invested (lent)Japan: $60 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.)

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Part 1

The effective interest rate in the Euromarket for the US$ is

enter your response here%.

(Round to two decimal places.)

Part 2

The effective interest rate in the Euromarket for the MP is

enter your response here%.

(Round to two decimal places.)

Part 3

The effective interest rate in the Euromarket for the is enter your response here%. (Round to two decimal places.)

Part 4

The effective interest rate in the domestic market for the US$ is

enter your response here%.

(Round to two decimal places.)

Part 5

The effective interest rate in the domestic market for the MP is

enter your response here%.

(Round to two decimal places.)

Part 6

The effective interest rate in the domestic market for the is enter your response here%.

(Round to two decimal places.)

Part 7

Following the assumption outlined in the problem, where should the $80 million fund be invested?(Select the best answer below.)

A. $80 million excess is to be invested in the domestic market.

B. $80 million excess is to be invested in the US$ Euromarket.

C. $80 million excess is to be invested in the Euromarket.

D. $80 million excess is to be invested in the US$ domestic market.

Part 8

Following the assumption outlined in the problem, where should the $60 million fund be raised?(Select the best answer below.)

A. $60 million to be raised in the MP domestic market.

B. $60 million to be raised in the MP Euromarket.

C. $60 million to be raised in the Euromarket.

D. $60 million to be raised in the domestic market.

Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)

	Currency
Item	US $	MP
Spot exchange rates		MP11.60/US$	108.25/US$
Forecast percentage change		3.00%	+1.50%
Interest rates
Nominal
Euromarket	4.00%	6.20%	2.00%
Domestic	3.75%	5.90%	2.15%
Effective
Euromarket
Domestic