3. A Canadian company has a division in Mexico. The Canadian company needs to borrow money for its Mexican division and has the choice of borrowing in Mexico or Canada. The effective annual interest rate in Canada is 6 percent and the interest rate in Mexico is 10 percent. The current exchange rate is 15 Mexican pesos per Canadian dollar. If you believe that the Canadian dollar will depreciate 10 percent against the Mexican peso over the next 6 months, where should the company borrow? For simplicity, assume that the company wants to borrow $100 dollars for 6 months. |
3. A Canadian company has a division in Mexico. The Canadian company needs to borrow money for its Mexican division and has the choice of borrowing in Mexico or Canada. The effective annual interest rate in Canada is 6 percent and the interest rate in Mexico is 10 percent. The current exchange rate is 15 Mexican pesos per Canadian dollar. If you believe that the Canadian dollar will depreciate 10 percent against the Mexican peso over the next 6 months, where should the company borrow? For simplicity, assume that the company wants to borrow $100 dollars for 6 months. |
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please answer my question it is the 3rd time that i am sending this question but you are not answering.
Transcribed Image Text:3. A Canadian company has a division in Mexico. The Canadian company needs to
borrow money for its Mexican division and has the choice of borrowing in Mexico or
Canada. The effective annual interest rate in Canada is 6 percent and the interest
rate in Mexico is 10 percent. The current exchange rate is 15 Mexican pesos per
Canadian dollar. If you believe that the Canadian dollar will depreciate 10 percent
against the Mexican peso over the next 6 months, where should the company
borrow? For simplicity, assume that the company wants to borrow $100 dollars for
6 months. |
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