1. You believe that IRP presently exists. The nominal annual interest rate in Mexico is 20%. The nominal annual interest rate in the US is 2%. You expected that annual inflation will be about 8% in Mexico and 5% in the US. The spot rate of the Mexican peso is $.15 per Mexican peso. You will receive 1 million pesos on one year. Determine the amount of dollars that you will receive if you use a forward hedge.
a. $127,000 b. $150,000 c. $176,000 d. $123,529
2. Use Net Present Value and Break-Even Point and explain how these techniques may help the Starbucks achieve better financial performance.