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The Mexican firms, Company U and Company M, each issue bonds denominated in USD. Company U sells all of its products in the US in
The Mexican firms, Company U and Company M, each issue bonds denominated in USD. Company U sells all of its products in the US in USD. Company M sells all of its products in Mexico in pesos. If the peso weakens, which of the following is true, all else equal:
a)Company U should always issue bonds denominated in pesos.
b)Company M will likely see its profits increase
c)Neither company needs to worry because bondholders, not the companies, take the currency risk after the bonds are issued
d)Company M is more exposed than Company U to a weaker peso
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