Denim Industries can borrow its needed financing for expansion using one of two foreign lending facilities. It can borrow at a nominal annual interest rate of 11% in Mexican pesos or it can borrow at 5% in Canadian dollars. If the peso is expected to depreciate by 10.18% and the Canadian dollar is expected to appreciate by 3%, which loan has the lower effective annual interest rate?

The effective annual interest rate of the loan in Mexican pesos is _____

The effective annual interest rate of the loan in Canadian dollars is ______

Which loan has the lower effective annual interest rate?

A. The loan in Canadian dollars OR B. The loan in Mexican pesos