4. A US company will be selling a large machine to a company in Mexico exactly one year from now in exchange for a payment of 40,000,000 Mexican Pesos. You are an analyst who is considering different ways of hedging this risk exposure (a) Forward Market Hedge (i) Find the appropriate forward rate for a 12 month forward from Barchart.com. Calculate the position you should take in the forward market to hedge the cash flow (ii)Draw a diagram showing the value of the large payment expressed in US dollars if the spot exchange rate changes by the following amounts over the next year:-20%,-15%,-10%,-5%, 0,5%, 10%, 15%, 20%. Show separately the unhedged position, the forward contract and the net position (b) Futures Market Hedge: Describe three differences if you used a futures contract to hedge in (a) instead of a forward contract (c) Money Market Hedge: Describe the steps you would take to hedge by borrowing money in one market, converting it to other currency and investing it. (Assume you can borrow and lend in the US at 3% and in Mexico at 7%) (d)Hedge with Options Use the quote from the CME group at the options tab on the futures page to select a strike price and obtain a price for an appropriate option. Draw a diagram that shows the (j) unhedged position, (ii) the value of the hedge, and (iii) the net position in US dollars that will be received if the exchange rate changes by-20%,-15%,-10%,5%, 0,5%, 10%, 15%, 20% 4. A US company will be selling a large machine to a company in Mexico exactly one year from now in exchange for a payment of 40,000,000 Mexican Pesos. You are an analyst who is considering different ways of hedging this risk exposure (a) Forward Market Hedge (i) Find the appropriate forward rate for a 12 month forward from Barchart.com. Calculate the position you should take in the forward market to hedge the cash flow (ii)Draw a diagram showing the value of the large payment expressed in US dollars if the spot exchange rate changes by the following amounts over the next year:-20%,-15%,-10%,-5%, 0,5%, 10%, 15%, 20%. Show separately the unhedged position, the forward contract and the net position (b) Futures Market Hedge: Describe three differences if you used a futures contract to hedge in (a) instead of a forward contract (c) Money Market Hedge: Describe the steps you would take to hedge by borrowing money in one market, converting it to other currency and investing it. (Assume you can borrow and lend in the US at 3% and in Mexico at 7%) (d)Hedge with Options Use the quote from the CME group at the options tab on the futures page to select a strike price and obtain a price for an appropriate option. Draw a diagram that shows the (j) unhedged position, (ii) the value of the hedge, and (iii) the net position in US dollars that will be received if the exchange rate changes by-20%,-15%,-10%,5%, 0,5%, 10%, 15%, 20%