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: $67 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.).

1. 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: $67 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.)