High interest rates are commonly expected to strengthen a countrys currency because they can encourage foreign investment in securities in that country, which results in the exchange of other currencies for that currency. Yet, the pesos value has declined against the dollar over most years even though Mexican interest rates are typically much higher than U.S. interest rates. Thus, it appears that the high Mexican interest rates do not attract substantial U.S. investment in Mexicos securities. Why do you think U.S. investors do not try to capitalize on the high interest rates in Mexico?

1. U.S. investors are worried about slow economic growth in the past in Mexico.

2. U.S. investors are worried about slow economic growth in the future in Mexico.

3. U.S. investors are worried about the impact of past inflation in Mexico.
4. U.S. investors are worried about the impact of future inflation in Mexico.