A Mexico-based bank reports its financials in Mexico Pesos (MXN). At the beginning of year, the bank has the following assets and liabilities:

Assets	Liabilities
MXN 8000 Mexican loans (made in MXN)	MXN 15,000 Mexican CDs (made in MXN)
MXN 7000 equivalent U.S. loans (made in USD)

Assume the following:
• the beginning-of-year spot exchange rate is MXN 20/$;
• the Mexico loans will mature in one year, are default-free, and have an interest rate of 4%;
• the U.S. loans will also last for one year, are default-free, and have an interest rate of 7%;
• the Mexico CDs will mature in one year and have an interest rate of 2%.

a. (40 pts) Assume the bank does not hedge against foreign exchange risk, and the end-of-year spot exchange rate turns out to be MXN 18/$. What's the bank's overall profitability in MXN? Hint1: consider all three businesses. Hint 2: measure the profitability in MXN, not in US$ or %. Hint 3: keep 2 decimal places and show your work.

b. (10 pts) Show how on-balance-sheet hedging can be done. You can either write in narratives or draw a new balance sheet. You don't have to show math/calculation on how the OBS hedging works.