MINI CASE 1 Efficient Funds Flow at Eastern Trading Company The Eastern Trading Company of Singapore purchases spices in bulk from around the world, packages them into consumer-size quantities and sells them through sales affiliates in Hong Kong, the United Kingdom and the United States. For a recent month, the payments matrix of interaffiliate cash flows (at right), stated in Singapore dollars, was forecast. Show how Eastern Trading can use multilateral netting to minimize the foreign exchange transactions necessary to settle interaffiliate payments. If foreign exchange transactions cost the company 0.5 percent, what savings result from netting? Eastern Trading Company Payments Matrix (S$000) Disbursements Hong Singapore Kong UK Total Receipts US Receipts Singapore Hong Kong UK US Total disbursements 34 40 75 8. 15 11 55 22 17 9. 170 30 32 45 25 65 84 94 277

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.