14 points Suppose a U.S. firm buys Mexican pesos (MP)1,100,000 worth of television tubes from...
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14 points Suppose a U.S. firm buys Mexican pesos (MP)1,100,000 worth of television tubes from a Mexican manufacturer for delivery in 60 days with payment to be made in 90 days 0 days after the goods are received). The rising U.S. deficit has caused the dollar to depreciate against the peso recently. The current exchange rate is 5.50 pesos per 1.5. dollar. The 90 day forward rate is 545 pesos/dollar. The firm goes into the forward market today and buys enough Mexican pesos at the 90-day forward rate to completely cover its trade obligation Assume the spot rate in 90 days is 5.30 Mexican pesos per US dollar a. How much did the US firm pay in uss for the television tubes with the forward contract? b. How much would they have paid had they not hedged? How much in US5 did the firm save or lose by eliminating its foreign exchange currency risk with its forward market hedge
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