1. Boeing Corporation, located in the United States, has anaccounts receivableof 300 million due in one year from a firm in Germany. The current spot rate is 1.50/$ and the one year forward rate is 1.46/$. The annual interest rate is 4% in the Germany and 6% in the United States. Boeing can also buy a one-year put option on the euro at the strike price of $.7124 per euro for a premium of $0.015 per euro.

a.Compute the guaranteed dollar proceeds at the time of paymentif Boeing decides to hedge using a forward contract. Show your calculations. (1 point)

b.Compute the guaranteed dollar proceeds at the time of paymentif Boeing decides to use a money market hedge. Show your calculations. (3 points)

c. List the stepsthat Boeing needs to take in order to use a money market hedge to eliminate its transaction exposure. Be sure to include the time (t=0 or T=1) at which is step must be taken. (3 points)

d. Suppose that Boeing decides to hedge using an option contract. Assume that the forward rate is the best predictor of the future spot rate. Is Boeing likely to exercise its option? Explain using the rates provided. (1 point)

e. Compute the expected dollar proceeds at the time of payment if Boeing decides to hedge using an option. Show your calculations. (2 point)