In 1993,Ford Simultaneously Borrows Spanish Pesetas at 13% and Invests

Multiple Choice

In 1993,Ford simultaneously borrows Spanish pesetas at 13% and invests dollars at 10%,both for one year.At the time Ford enters into these transactions,the spot rate for the peseta is $0.095.If the spot rate is Ptas.1 = $0.087 in one year,what is the cost to Ford of this money market hedge?

A) 2.0%
B) 3.8%
C) 1.3%
D) Ford has a 6.5% gain,not a cost