Problem #$3$

New Haven Corporation is located in the U$.$S$.$ and purchases products for $85,000,000$ Mexican Peso from a supplier in

Mexico. Payment is due in $90$ days. The current spot rate is $$1=20\mathrm{.}1192$ Mexican Peso. New Haven Corp. expects that

the Peso will appreciate from current levels. To hedge against the possible appreciation of the Peso, New Haven Corp.

signs a contract with XYZ Global Bank to purchase Peso forward in $90$ days at a rate of $$1=19\mathrm{.}50$ Peso.

a$)$ Compute the current value of Accounts Payable to New Haven Corp.

b$)$ How much will New Haven pay to purchase the Peso forward in $90$ days?

Problem #$4$

Using the same facts as in Problem #$3,$ assume that at the end of $90$ days, the spot rate is $$1=20\mathrm{.}4326$ Peso. Did it make

sense for New Haven to hedge its payable? Explain. $|$