Question
Kine, fancy footwear manufacturing company has an obligation to pay MXN 14 million in 30 days for a recent shipment from Mexico. The CFO of
Kine, fancy footwear manufacturing company has an obligation to pay MXN 14 million in 30 days for a recent shipment from Mexico. The CFO of Kine is contemplating hedging the company's MXN exposure on this transaction. She collects the below information regarding the interest rates and exchange rates, from her forex trader: Spot Rate: MXN 20.08 / USD Forward Rate: MXN 20.28 / USD 30-day Put Option on USD MXN 19.50 / USD: 1% Premium 30-day Call Option on USD MXN 20.50/ USD: 3% Premium USD 30-day interest rate (annualized): 7.5% MXN 30-day interest rate (annualized): 15% You are required to answer the below questions to assist the CFO:
What is the hedged cost of Kine's payable using money market hedge?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started