FSU Wk2 International Banking and Finance Mexican Peso Questions Discussion
Textbook: International Financial Management 11th Edition
Author: Jeff Madura
Read Chapters 4, 5, & 6Answer the following questions…
Given the factors that affect the value of a foreign currency, describe the type of economic or other conditions in Mexico that could cause the Mexican peso to weaken, and therefore to adversely affect your business.
Explain how currency futures could be used to hedge your business in Mexico. Explain how currency options could be used to hedge your business in Mexico.
a. Explain how your business would likely be affected (at least in the short run) if the central bank of Mexico intervened in the foreign exchange market by exchanging Mexican pesos for dollars in the foreign exchange market.
b. Explain how your business would likely be affected if the central bank of Mexico used indirect intervention by lowering Mexican interest rates (assume inflationary expectations have not changed).