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Mizner Inc is a US based MNC with a subsidiary in Mexico Its Mexican subsidiary needs a one year loan of 10 million pesos for operating expenses It can borrow pesos at 11% and can use peso


Mizner, Inc., is a U.S. based MNC with a subsidiary in Mexico. Its Mexican subsidiary needs a one year loan of 10 million pesos for operating expenses. It can borrow pesos at 11% and can use peso revenues to be received over the year to repay the loan. Alternatively, it can borrow dollars at 6%. Interest rate parity exists. The forward rate of the peso is expected to overestimate the spot rate of the peso in one year. Should the subsidiary borrow pesos or dollars?

Apr 01 2020 View more View Less

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