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Assume B&G Inc. will receive 20 million Mexican pesos in 18 months. It does not have a relationship with a bank at this time, and
Assume B&G Inc. will receive 20 million Mexican pesos in 18 months. It does not have a relationship with a bank at this time, and therefore cannot obtain a forward contract to hedge its receivable at this time. However, in 6 months, it will be able to obtain a one-year (12-month) forward contract to hedge its receivable. Today the 6- month U.S. interest rate (not annualized) is 0.50%, the 12-month U.S. interest rate 1.25%, the 6-month Mexican peso interest rate is 3%, and the 12-month Mexican peso interest rate is 6%. Assume that both interest rate parity and international fisher effect exist. Assume that the existing interest rates are expected to remain constant over time. The spot rate of the Mexican peso today is $0.08. Based on this information, estimate the amount of dollars that B&G Inc. will receive in 18 months. 0 $1,491,207.181 0 $1,716.729.931 O $1,675,061.728 O$1,528,301.887
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