Convert to pesos to cover the operating expenses

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Reference no: EM132038447

Lakeland, Inc., is a U.S. based MNC with a subsidiary in Mexico. Its Mexican subsidiary needs a one year loan of 20 million pesos for operating expenses. Since the Mexican interest rate is 76 percent, Lakeland is considering borrowing dollars, which it would convert to pesos to cover the operating expenses. By how much would the dollar have to appreciate against the peso to cause such a strategy to backfire? (The one year U.S. interest rate is 9%.)

Reference no: EM132038447

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