Assignment:
Walt Disney expects to receive a Mex$16 million theatrical fee from Mexico in 90 days. The current spot rate is $0.1321/Mex$, and the 90-day forward rate is $0.1242/Mex$.
a. What is Disney’s peso transaction exposure associated with this fee?
b. If the spot rate expected in 90 days is $0.1305, what is the expected U.S. dollar value of the fee?
c. What is the hedged dollar value of the fee?
d. What factors will influence the hedging decision?
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.