Question: GM (a US MNC) borrows MXN 2 million for two years at an interest rate of 7.64% per annum. The current exchange rate is MXN31.32/USD.

GM (a US MNC) borrows MXN 2 million for two years at an interest rate of 7.64% per annum. The current exchange rate is MXN31.32/USD. Alternatively, the subsidiary could have borrowed the USD-equivalent of MXN 2 million in the US for 2 years at 6.92% per annum. What is the ex-post cost of the loan at maturity? Assume the marginal tax rate that GM pays is 15.50%. a. 5.193% O b. 7.894% O c. 6.343% O d. 8.669% e. 11.164%

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