International financial markets

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Analytical Application

Using International Financial Markets

Worcester Tool Company is a large, U.S.-based, multinational corporation with subsidiaries in eight different countries. The parent of Worcester provided an initial cash infusion to establish each subsidiary. Each subsidiary, however, has had to finance its own growth since then. The parent and subsidiaries of the firm typically use Citigroup (with branches in numerous countries) when possible to facilitate any flow of funds necessary.

a. Explain the various ways in which Citigroup could facilitate Worcester's flow of funds, and identify the type of financial market where that flow of funds occurs. For each type of financing transaction, specify whether Citigroup would serve as the creditor or would simply facilitate the flow of funds to the firm.

b. Recently, the British subsidiary called on Citigroup for a medium-term loan and was offered the following alternatives.

LOAN DENOMINATED IN

ANNUALIZED RATE

British pounds 13%

U.S. dollars 11%

Canadian dollars 10%

Japanese yen 8%

Reference no: EM131623842

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