I run a lemonade stand. I buy lemons from Mexico. I pay in Pesos. I plan to buy 50,000 lemons in...

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I run a lemonade stand. I buy lemons from Mexico. I pay in Pesos. I plan to buy 50,000 lemons in May, June, July and August. It’s a very big lemonade stand.The spot price of lemons is now 1 peso per lemon.What is my currency risk?How can I manage this risk?Please advise.You should use the data from the Board of Governors of the Federal Reserve on the Dollar/Peso exchange rate as a starting point.
	
Document Preview: I run a lemonade stand.  I buy lemons from Mexico. I pay in Pesos. I plan to buy 50,000 lemons in May, June, July and August. It’s a very big lemonade stand.The spot price of lemons is now 1 peso per lemon.What is my currency risk?How can I manage this risk?Please advise.You should use the data from the Board of Governors of the Federal Reserve on the Dollar/Peso exchange rate as a starting point.

David · Accepted Answer

The exchange rate prevailing between Dollar/Peso as per the Board of Governors of the Federal 
Reserve is 17.96 Peso per Dollar. This shows that Dollar is strong currency over Peso. Currently, 
each Dollar is able to buy around 18 lemonade since the spot price prevailing is 1 peso per lemon 
and one dollar is able to buy 17.96 Peso i.e., around 18 Peso per Dollar.

I run a lemonade stand. I buy lemons from Mexico. I pay in Pesos. I plan to buy 50,000 lemons in May, June, July and August. It’s a very big lemonade stand. The spot price of lemons is now 1 peso per...

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