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8. Fort Collins, Inc. has $1 million in cash available for 30 days. It can earn 1% on a 30-day investment in the U.S. Alternatively, if it converts the dollars to Mexican pesos, it can earn 1 1/2% on a Mexican deposit. The spot rate of the Mexican peso is $.12, and the spot rate 30 days from now is expected to be $.10. Should Ft. Collins invest its cash in the U.S. or in Mexico? Support your answer.

8. Fort Collins, Inc. has $1 million in cash available for 30 days. It can earn 1% on a 30-day investment in the U.S. Alternatively, if it converts the dollars to Mexican pesos, it can earn 1 1/2% on a Mexican deposit. The spot rate of the Mexican peso is $.12, and the spot rate 30 days from now is expected to be $.10. Should Ft. Collins invest its cash in the U.S. or in Mexico? Support your answer.

International Financial Management
International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter21: International Cash Management
Section: Chapter Questions
Problem 8QA
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8. Fort Collins, Inc. has $1 million in cash available for 30 days. It can earn 1% on a 30-day investment in the U.S. Alternatively, if it converts the dollars to Mexican pesos, it can earn 1 1/2% on a Mexican deposit. The spot rate of the Mexican peso is $.12, and the spot rate 30 days from now is expected to be $.10. Should Ft. Collins invest its cash in the U.S. or in Mexico? Support your answer.
Transcribed Image Text:8. Fort Collins, Inc. has $1 million in cash available for 30 days. It can earn 1% on a 30-day investment in the U.S. Alternatively, if it converts the dollars to Mexican pesos, it can earn 1 1/2% on a Mexican deposit. The spot rate of the Mexican peso is $.12, and the spot rate 30 days from now is expected to be $.10. Should Ft. Collins invest its cash in the U.S. or in Mexico? Support your answer.
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