There is an increasing demand in the US to learn Spanish because many students want to study abroad in Latin American countries and an increase Hispanic population in the US. Now given your company experiences in teaching English in Mexico, strategically your company decided to produce Spanish learning package including multimedia materials in Mexico and then imports them back to the US for Americans who want to learn Spanish. Recall that your Mexican business operation cost is in pesos, earnings from export of English learning package sales and tuition are also in pesos, loan in pesos, pricing of export sales is based on pesos, and import Spanish learning material is invoiced and paid in USD.

6. (10p) From the peso-USD exchange rate forecast, it looks like peso would be declining for sometimes three or four years down the road. Your management team asks you to make a solid recommendation as how to manage each foreign exchange exposures respectively. Please list the hedging policy recommendations regarding each exposure. Since you offered good recommendations in the past, your boss hopes you can offer some advantages and disadvantages for each of short and long term strategies so that they can be better informed and then to make good decision.