A U.S. firm has a MXN 25,000,000 payable (money they will owe to a supplier, for example)
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Question:
A U.S. firm has a MXN 25,000,000 payable (money they will owe to a supplier, for example) due in 4 months. The current exchange rate is $.182/MXN and the U.S. firm fears the MXN could appreciate substantially over the next 4 months. The interest rate on 4-month MXN money market deposits is 2.0% (a periodic rate, not a yearly rate). How could the U.S. firm execute a money market hedge?
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