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?

Answer rating: 100% (QA)

MXN to be borrowed today can be calculated by using the formula Amount receivable ... View the full answer