Question: XYZ, a U.S. based multinational has recently established two subsidiaries in Canada. These subsidiaries are massive and do import a significant number of materials. The

XYZ, a U.S. based multinational has recently established two subsidiaries in Canada. These subsidiaries are massive and do import a significant number of materials. The subsidiaries sell a large portion of their products locally. XYZs excess earnings beyond what it needs in Canada is remitted back to the United States. XYZ is likely to build additional subsidiaries in Canada and other countries in Europe in the future.

Explain how the XYZ subsidiaries in Canada would use the spot market in foreign exchange.

Explain how XYZ might utilize the international money market when it is establishing other XYZ subsidiaries in Europe.

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