Suppose a U.S. firm buys $200,000 worth of television tubes from a Mexican manufacturer for delivery in 60 days with pay

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answerhappygod
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Suppose a U.S. firm buys $200,000 worth of television tubes from a Mexican manufacturer for delivery in 60 days with pay

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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 5.68 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?
Do not round the intermediate calculations and round the final
answer to the nearest cent.
a. $4,542.43
b. $5,899.26
c. $5,309.33
d. $5,840.26
e. $6,725.15
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