Chapter 11

Suggest how the U.S. firm could implement a money market hedge. Be precise. ANSWER: If the firm deposited MXP186,916 (computed as MXP200,000/1.07) into a Mexican bank earning 7% over 6 months, the deposit would be worth 200,000 pesos at the end of the sixmonth period. This amount would then be used to take care of the net payables. ................
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