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.

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Currency Item US S MP Spot exchange rates Forecast percent change Interest rates MP 11.60/USS Y108.25/USS -3.0% +1,5% Nominal Euromarket Domestic 4.00% 3.75% 6.20% 5.90% 2.00% 2.15% Effective Euromarket Domestic