A United States company will be selling a large machine to a company in Mexico exactly one year from now in exchange for a payment of 20,000,000 Mexican Pesos. You are an analyst who is considering different ways of hedging this risk exposure.
Money Market Hedge - Describe the steps you would take to hedge by borrowing money in one market, converting it to other currency and investing it. (Assume you can borrow and lend in the US at 2% and in Mexico at 7.5%.