Assume that a U.S. firm can invest funds for one year in the U.S. at 9% or invest funds in Mexico at 16%. The spot rate of the peso is $.050 while the one-year forward rate of the peso is $.050. If a U.S. firm uses covered interest arbitrage, which of the following price adjustments should result?

Spot rate of peso decreases, forward rate of peso increases

Spot rate of peso increases, forward rate of peso remains constant.

Spot rate of peso increases, forward rate of peso increases.

Spot rate of peso decreases, forward rate of peso decreases.

Spot rate of peso increases, forward rate of peso decreases.