Suppose a U.S. firm buys $250,000 worth of stereo speaker wire from a Mexican manufacturer

for delivery in 60 days with payment to be made in 90 days (30 days after the goods are received). The

rising U.S. deficit has caused the dollar to depreciate against the peso recently. The current exchange

rate is 5.50 pesos per U.S. dollar. The 90-day forward rate is 5.45 pesos/dollar. The firm goes into the

forward market today and buys enough Mexican pesos at the 90-day forward rate to completely cover

its trade obligation. Assume the spot rate in 90 days is 5.30 Mexican pesos per U.S. dollar. How

much in U.S. dollars did the firm save by eliminating its foreign exchange currency risk with its

forward market hedge?