Suppose that Boeing Corporation exported a Boeing 747 to Lufthansa and billed €10 million payable in one year. The money

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Suppose That Boeing Corporation Exported A Boeing 747 To Lufthansa And Billed 10 Million Payable In One Year The Money 1 (132.07 KiB) Viewed 55 times

Suppose that Boeing Corporation exported a Boeing 747 to Lufthansa and billed €10 million payable in one year. The money market interest rates and foreign exchange rates are given as follows: The U.S. one-year 6.10% per annum interest rate: The euro zone one- 9.00% per annum year interest rate: The spot exchange 1.50/€ rate: The one-year forward 1.46/€ exchange rate Assume that Boeing sells a currency forward contract of €10 million for delivery in one year, in exchange for a predetermined amount of U.S. dollars. Suppose that on the maturity date of the forward contract, the spot rate turns out to be $1.40/€ (i.e. less than the forward rate of $1.46/€). Which of the following is true? Boeing gained $0.6 million from forward hedging. Boeing would have received only $14.0 million, rather than $14.6 million, had it not entered into the forward contract. Additionally, Boeing gained $0.6 million from forward hedging. Boeing would have received only $14.0 million, rather than $14.6 million, had it not entered into the forward contract. none of the options ОО