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A U.S. firm has a MXN 40,000,000 receivable (money a customer will pay them, for example) coming in 4 months. The current exchange rate is
A U.S. firm has a MXN 40,000,000 receivable (money a customer will pay them, for example) coming in 4 months. The current exchange rate is $.0845/MXN and the U.S. firm fears the MXN could depreciate substantially over the next 4 months. The interest rate on 4-month MXN money market deposits is 3.10% (a periodic rate, not a yearly rate) and money market borrowings is 3.50% (a periodic rate).How much can the U.S. firm guarantee its receivable to be worth in dollars today?
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