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 interest rate in Canada is 8 percent and the effective interest rate in Mexico is 15 percent. The current exchange rate is 10 Mexican pesos per Canadian dollar. If you believe that the Canadian dollar will appreciate 5 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. (4 marks)

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 interest rate in Canada is 8 percent and the effective interest rate in Mexico is 15 percent. The current exchange rate is 10 Mexican pesos per Canadian dollar. If you believe that the Canadian dollar will appreciate 5 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. (4 marks)