Investors to borrow abroad to invest domestically

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Reference no: EM131093220

Following an increase in Mexican prices would interest rates relative to U.S. interest rates, which caused Mexican investors to borrow abroad to invest domestically, which of the following would occur?

a. The dollar would appreciate relative to the peso, and Mexican prices would increase.

b. The dollar would depreciate relative to the peso, and Mexican prices would decrease.

c. The dollar would depreciate relative to the peso, and Mexican prices would increase.

d. The exchange rate would not be affected, and neither would Mexican prices.

Explain why you choose that option, please.

Reference no: EM131093220

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