You are considering a major marketing campaign in Mexico. If you implement it, you will incur high

Question:

You are considering a major marketing campaign in Mexico. If you implement it, you will incur high expenses in Mexican pesos and will need to finance the cost. To cover the cost, you can either borrow dollars at a low interest rate and convert them to Mexican pesos or borrow Mexican pesos. You expect to pay off the loan on a monthly basis over the next year by using a portion of the revenue you generate from your business in Mexico.
a. Will 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 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...