consolidating exposure. the southern truck company is expecting the following cash flows in a foreign currency. in mexico, one and two year interest rate are 10 percent and 8 percent, respectively. these rates apply to deposit of mxn in banks. assume annual compounding. estimate the consolidated exposure of the company in year 2.

3) Consolidating Exposure. The Southern Truck Company is expecting the following cash flows (see the following table) in a foreign currency. In Mexico, one- and two-year interest rates are 10 percent and 8 percent. respectively. These rates apply to deposits of MXN in banks. Assume annual compounding. Estimate the consolidated exposure of the company in year 2. (Hint: Because the term structure is not flat, calculate the relevant forward rate. Time Year 1 Year 2 Cash flow (MXN millions) 20 40 . TT 1 "llinn and AUD