If you decide to implement a major marketing campaign in Mexico, you will incur high expenses in

Question:

If you decide to implement a major marketing campaign in Mexico, you will incur high expenses in Mexican pesos. You would need to finance the cost of your marketing. You could either borrow dollars at a low interest rate and convert them to Mexican pesos to cover the cost, or borrow Mexican pesos to cover the cost. You would expect to pay off the loan on a monthly basis over the next year with the use of a portion of the revenue you generate from your business in Mexico.
a. Would your business be more exposed to risk if you borrow dollars or Mexican pesos?
b. Explain how you would make the decision to borrow dollars versus Mexican pesos. What is the key factor (other than the interest rate of each currency) that will determine whether you should borrow dollars or Mexican pesos.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...