International finance

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International Finance. Please show all work whether in Excel or Word

Assume that Calumet Co. will receive 10 million pesos in 15 months.  It does not have a relationship with a bank at this time, and therefore cannot obtain a forward contract to hedge its receivables at this time.  However, in three months, it will be able to obtain a one-year (12-month) forward contract to hedge its receivables.  Today the three-month U.S. interest rate is 3% (not annualized), the 12-month U.S. interest rate is 8%, the three-month Mexican peso interest rate is 5% (not annualized), and the 12-month peso interest rate is 20%. Assume that interest rate parity exists. Assume the international Fisher effect exists. Assume that the existing interest rates are expected to remain constant over time. The spot rate of the Mexican peso today is $.10. Based on this information, estimate the amount ofdollars that Calumet Co. will receive in 15 months.

Reference no: EM132134744

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