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: $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 andraised.