HEDGING ACCOUNTS PAYABLE

6m A/P GBP 400,000

1Y US RATE = 4.75%

1Y UK RATE = 5.00%

6m FORWARD RATE GBP/$1.61

GBP SPOT RATE = $1.60

Forward hedge cost?

Money Market Hedge (MMH) cost?

Assume a U.S.-based company has net payables of 300,000 Mexican pesos (MXP) in 180 days. The Mexican interest rate is 7% over 180 days & the spot rate of the peso is $0.10. What is the initial deposit amount of a MMH in USDs?