The firm uses money market hedge

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Assume that Vermont Co. has net payables of 1,000,000 Mexican pesos in 180 days. The Mexican periodic interest rate is 6% over 180 days (12% per year compounded semi-annually), and the spot rate of the Mexican peso is $0.065. Assume US periodic interest rates of 1% over 180 days or (annual rate is 2%, so periodic rate is 1% per 180 days). What is the US dollar cost of the payables in 180 days if the firm uses a money market hedge? Assume borrowing and lending rates are the same for simplicity. Be precise.

Reference no: EM131606941

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