Delicious Burgers is a U.S.-based MNC with two subsidiaries, one in Japan (local currency, yen, ¥) and one in Brazil (local currency, Brazilian real, R$). The MNC’s economists forecasted the following short-term financing position for each subsidiary: 

Japan: US$50 million cash to be raised (borrowed) 

Brazil: US$75 million excess cash to be invested (lent)

The following data are available:

Local regulations stipulate that a subsidiary is not permitted to use the domestic market of any other subsidiary. Calculate the effective interest rates for all three currencies in both the Euromarkets and the domestic market. Based on your calculations, indicate where the funds should be invested and raised.

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Item Spot exchange rates Forecast percent change Interest rates Nominal Euromarket Domestic Effective Euromarket Domestic US$ 4.50% 4.25% ¥ ¥103.3/US$ -2.00% 6.35% 6.00% R$ 2.35BRL/US$ +1.50% 2.50% 2.35%