FX hedging (10 pts). Your company has contracted to buy 400 tons of cement from Cemex, a Mexican cement company. One year from now, your company has to make a 2/3 2000 Peso payment to Cemex. As the head of a large construction company, you would rather not take on any exchange rate risk. a. Your economic consultant suggests contracting in the forward market to buy Pesos and investing enough money today in US$ T-bills to make the payment. If the one-year forward rate is fusd/Peso = 0.10 and the one-year T-bill return is 3%, how much money should you invest today, to make your Peso payment next year? b. Suppose that one year later, when you take delivery of your Pesos, the spot exchange rate is SUSD/Peso = 0.12. Was the hedge helpful? FX hedging (10 pts). Your company has contracted to buy 400 tons of cement from Cemex, a Mexican cement company. One year from now, your company has to make a 2/3 2000 Peso payment to Cemex. As the head of a large construction company, you would rather not take on any exchange rate risk. a. Your economic consultant suggests contracting in the forward market to buy Pesos and investing enough money today in US$ T-bills to make the payment. If the one-year forward rate is fusd/Peso = 0.10 and the one-year T-bill return is 3%, how much money should you invest today, to make your Peso payment next year? b. Suppose that one year later, when you take delivery of your Pesos, the spot exchange rate is SUSD/Peso = 0.12. Was the hedge helpful