12. Airbus Q Airbus sold an aircraft, A400, to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/ and six-month forward exchange rate is $1.10/ at the moment. Airbus can buy a six-month put option on U.S. dollars with a strike price of 0.95$ for a premium of 0.02 per U.S. dollar. Airbus can buy a six-month call option on U.S. dollars with a strike price of 0.85/$ for a premium of 0.03 per U.S. dollar. In addition, Airbus can buy a six-month put option on U.S. dollars with a strike price of 0.95/$ for a premium of 0.02 per U.S. dollar. Currently, six-month interest rate is 2.5% (5% per annum) in the euro zone and 3.0% 6% per annum) in the U.S. What are alternative strategies of managing transaction exposure? Fill in the following table that shows possible Euro amount Airbus receives when the actual spot rate (first row) is realized depending on different alternative decisions. All the values are euro amount at the time when $30M is received. Put all alternatives in a graph. Y-axis shows the euro amount of $30 million, and X-axis is the ending exchange rate of euro per one unit of USD. Ending spot rate 1.15 1.10 1.05 1.00 ($/euro) spot rate Ending (euro/$) Unhedged Forward Money Market FC Put (min) 12. Airbus Q Airbus sold an aircraft, A400, to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/ and six-month forward exchange rate is $1.10/ at the moment. Airbus can buy a six-month put option on U.S. dollars with a strike price of 0.95$ for a premium of 0.02 per U.S. dollar. Airbus can buy a six-month call option on U.S. dollars with a strike price of 0.85/$ for a premium of 0.03 per U.S. dollar. In addition, Airbus can buy a six-month put option on U.S. dollars with a strike price of 0.95/$ for a premium of 0.02 per U.S. dollar. Currently, six-month interest rate is 2.5% (5% per annum) in the euro zone and 3.0% 6% per annum) in the U.S. What are alternative strategies of managing transaction exposure? Fill in the following table that shows possible Euro amount Airbus receives when the actual spot rate (first row) is realized depending on different alternative decisions. All the values are euro amount at the time when $30M is received. Put all alternatives in a graph. Y-axis shows the euro amount of $30 million, and X-axis is the ending exchange rate of euro per one unit of USD. Ending spot rate 1.15 1.10 1.05 1.00 ($/euro) spot rate Ending (euro/$) Unhedged Forward Money Market FC Put (min)
