In February 1994, Argentinas currency board was in place, and 1 peso was exchangeable into 1 US dollar. The following interest rates were available. U.S. LIBOR 60 days: 3.00% p.a., USD interest rate in Argentina, 60-day deposits: 3.25% p.a., Peso 60-day deposits: 6.99% p.a. Assume that if the peso were to depreciate, investors figure it will depreciate by 30%. Also, assume that if the Argentine bank were to default on its dollar obligations, it would pay nothing to investors. Then the probability that the peso will devalue is __________. Assume that default and devaluation by Argentine authorities are independent events.

a. 2.19%

b. 11.65%

c. 12.43%

d. 2.05%