Textbook Problem

The Bloomberg website (www.bloomberg.com) provides interest rate data for many countries and various maturities. Go to Rates & Bonds and click on "Australia.**quot; Consider a subsidiary of a U.S.-based MNC that is located in Australia. Assume that when it borrows in Australian dollars, it would pay 1 percent more than the risk-free (government) rates shown on the website. What rate would the subsidiary pay for 1-year debt? For 5-year debt? For 10-year debt? Assuming that it needs funds for 10 years, do you think it should use 1 -year debt, 5 -year debt, or 10 -year debt? Explain your answer.