Problem 1.4 (15 points) John purchases a vehicle that costs $20,000. He will pay $2,500 immediately and the remaining $17,500 in annual end–of–year principal payments of $2,500 per year for the next 7 years. In addition to the principal payment, he must pay 15% interest on the unpaid balance of the loan each year. What is the total payment of year 3 (principal and interest) at the end of the third year?

You are the cfo of a u. s. firm whose wholly owned subsidiary in mexico manufactures component parts for your u. s. assembly operations. the subsidiary has been financed by bank borrowings in the united states. one of your analysts told you that the mexican peso is expected to depreciate by 30 percent against the dollar on the foreign exchange markets over the next year. what actions, if any, should you take