Why has the global capital market grown so rapidly in recent decades? Do you think this growth will continue throughout the next decade? Why or why not? In 2008-2009, the world economy retrenched in the wake of a global financial crisis. Did the globalization of capital markets contribute to this crisis? If so, what can be done to stop global financial contagion in the future? A firm based in Mexico has found that its growth is restricted by the limited liquidity of the Mexican capital market. List the firm’s options for raising money on the global capital market. Discuss the pros and cons of each option, and make a recommendation. How might your recommended options be affected if the Mexican peso depreciates significantly on the foreign exchange markets over the next two years? Happy Company wants to raise $2 million with debt financing. The funds are needed to finance working capital, and the firm will repay them with interest in one year. Happy Company’s treasurer is considering three options: Borrowing U.S. dollars from Security Pacific Bank at 8 percent. Borrowing British pounds from Midland Bank at 14 percent. Borrowing Japanese yen from Sanwa Bank at 5 percent. If Happy borrows foreign currency, it will not cover it;that is, it w simply change foreign currency for dollars at today’s spot rate and buy the same foreign currency a year later at the spot rate then in effect. Happy Company estimates the pound will depreciate by 5 percent relative to the dollar and the yen will appreciate 3 percent relative to the dollar in the next year. From which bank should Happy Company borrow?
