The treasurer of a company in Mexico is comparing two borrowing alternatives for a $10,000 one year loan. He can borrow in U.S. dollars from a U.S. bank at a 12 percent interest rate or from a Mexican bank in pesos at a 25 percent interest rate. The spot exchange rate is 10 pesos to the dollar. The one year forward exchange rate is 12 pesos to the dollar.

What is the effective interest rate in pesos on the U.S. loan?