P19-5 (similar to) Question Help 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: $86 million excess cash to be invested (lent) Japan: $66 million funds to be raised (borrowed) The management gathered the following data: Determine the effective interest rates for all three currencies in both the Euromarket and the domestic market; then indicate where the funds should be invested and raised. (Note: Assume that because of local regulations, a subsidiary is not permitted to use the domestic market of any other subsidiary.) The effective interest rate in the Euromarket for the US$ is %. (Round to two decimal places.) X Data Table (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 MP11.57/US$ -3.05% 108.63/US$ + 1.45% Item Spot exchange rates Forecast percentage change Interest rates Nominal Euromarket Domestic Effective Euromarket Domestic 3.98% 3.79% 6.23% 5.91% 1.96% 2.11% Print Done P19-5 (similar to) Question Help 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: $86 million excess cash to be invested (lent) Japan: $66 million funds to be raised (borrowed) The management gathered the following data: Determine the effective interest rates for all three currencies in both the Euromarket and the domestic market; then indicate where the funds should be invested and raised. (Note: Assume that because of local regulations, a subsidiary is not permitted to use the domestic market of any other subsidiary.) The effective interest rate in the Euromarket for the US$ is %. (Round to two decimal places.) X Data Table (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 MP11.57/US$ -3.05% 108.63/US$ + 1.45% Item Spot exchange rates Forecast percentage change Interest rates Nominal Euromarket Domestic Effective Euromarket Domestic 3.98% 3.79% 6.23% 5.91% 1.96% 2.11% Print Done