Question
8 points) Textron Aviation, based in Wichita, will build airplanes and export them to Mexico for delivery in 3 years. The total payment to be
8 points) Textron Aviation, based in Wichita, will build airplanes and export them to Mexico for delivery in 3 years. The total payment to be received in 3 years for these exports is 900 million pesos. Today the pesos spot rate is $.10. The annual U.S. interest rate is 4%, regardless of the debt maturity. The annual Mexican interest rate is 9% regardless of the debt maturity. Textron Aviation plans to hedge its exposure with a forward contract that it will arrange today. Assume that interest rate parity exists. Determine the dollar amount that Textron Aviation will receive in 3 years. (Hint: Dont forget to compound interest rates for three years.)
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