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1. (9 pts) Suppose that Boeing corporation exported a Boeing 747 to British Airways and would receive 10 million in one year. Suppose that Boeing
1. (9 pts) Suppose that Boeing corporation exported a Boeing 747 to British Airways and would receive 10 million in one year. Suppose that Boeing decides to use option market hedge, and it purchased a put option on 10 million pounds with a one-year maturity, an exercise price of $1.4/f, and an option premium of S0.02/f. Suppose the initial exchange rate when it enters into the option contract is also $1.4/E a) (3pts) Assume that the exchange rate turn out to be $1.30/f in one year. What is Boeing's profit/loss from his option position? (Hint: you need to adjust for the option premium paid upfront) b) (3pts) What's Boeing profit/loss from his hedged position relative to the initial exchange rate? c) (3pts) What would be Boeing profit/loss from its hedged position relative to the initial exchange rate if in one year the exchange rate in one year turns out to be $1.5/E
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