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

9% in Mexican pesos or it can borrow at 3% in Canadian dollars. If the peso is expected to depreciate by 9.02 % and the Canadian dollar is expected to appreciate by

4%, which loan has the lower effective annual interest rate?

A) The effective annual interest rate of the loan in Mexican pesos is _________ %. (Round to two decimal places.)

B) The effective annual interest rate of the loan in Canadian dollars is ________% (Round to two decimal places.)

C) Which loan has the lower effective annual interest rate? (Select the best answer below.)

a.The loan in Mexican pesosMexican pesos.

b. The loan in Canadian dollars.