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You work for a U.S. firm that exports to Mexico and expects to receive 100,000,000 pesos (MXN) a year from now. The one-year U.S. interest
You work for a U.S. firm that exports to Mexico and expects to receive 100,000,000 pesos (MXN) a year from now. The one-year U.S. interest rate is 1% when investing funds and 4% when borrowing funds. The one-year Mexican interest rate is 6% when investing funds and 9% when borrowing funds. The current spot rate of the MXN is $0.05. If your firm decides to use a money market hedge, how many U.S. dollars will it receive a year from now?
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