Abc british firm has a plant in mexico what will abc do to, Financial Management

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Abc british firm has a plant in mexico what will abc do to

ABC (British firm) has a plant in Mexico. ABC anticipates that they will need 8,000,000 pesos to meet next month's payroll. ABC is considering entering into a forward contract to mitigate exchange rate risk. ABC finds a bank that is willing to enter into a one month forward contract on 8 million pesos at a forward rate of £.11/peso. Currently, the spot rate is £.12/peso. Assume that the spot rate is £.14/peso when the forward contract expires.

What will ABC do to mitigate its exchange rate risk?

Wait one month and buy 8 million pesos to meet their payroll obligations.

Wait one month and sell 8 million pesos to meet their payroll obligations.

Sell a forward contract on 8 million pesos.

None of the above.

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