Suppose a U

question 24

Multiple Choice

Suppose a U.S.firm buys $200,000 worth of television tubes from a Mexican manufacturer for delivery in 60 days with payment to be made in 90 days (30 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 U.S.dollar.The 90-day forward rate is 5.45 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 U.S.dollar.How much in U.S.dollars did the firm save by eliminating its foreign exchange currency risk with its forward market hedge?

• A)$4,897.59
• B)$5,155.36
• C)$5,426.69
• D)$5,712.31
• E)$5,997.92

---

Definitions:

Right to Refuse Treatment

The legal right of patients, deemed competent to make such decisions, to refuse medical treatment, including psychiatric medication.

Manic or Psychotic

Referring to a state of high energy, often with grandiose plans and behaviors, that may disconnect individuals from reality, sometimes seen in bipolar disorder.

Impaired Competence

A reduced ability or effectiveness in fulfilling or carrying out tasks or duties to a satisfactory standard.

Defense Attorneys

Legal professionals who represent and defend the rights of individuals accused of crimes in court.