Solved: Should fort collins invest its cash, Accounting Basics

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Should fort collins invest its cash

Problem: Fort Collins, Inc., has $1 million in cash available for 30 days. It can earn 1 percent on a 30-day investment in the United States. Alternatively, if it converts the dollars to Mexican pesos, it can earn 1.5 percent on a Mexican deposit. The spot rate of the Mexican peso is $.12. The spot rate 30 days from now is expected to be $.10.

Should Fort Collins invest its cash in the United States or in Mexico? Substantiate your answer.

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