14. Lufthansa - A/P Lufthansa (German airliner) bought an aircraft, 787 Dreamliner, from Boeing, a U.S. company, and agreed to pay $30 million payable in six months. Lufthansa is concerned with the euro payment of international purchases and would like to control exchange risk. The current spot exchange rate is $1.30/ and six-month forward exchange rate is $1.20/ at the moment. Airbus can buy a six-month put option on U.S. dollars with a strike price of 0.8/$ for a premium of 0.02 per U.S. dollar. In addition, 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. 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. The following table shows possible Euro amount Lufthansa pays when the actual ending spot rate (first row) is realized depending on different alternative decisions. The question number is in the table. All the values are euro amount at the time when $30M is paid. The number in the table refers to the question number. Ending spot rate (S/Euro) 1.30 Unhedged Forward Money Market Options Show all alternatives in a graph specifying x-axis and y-axis. 1.25 1.20 1.15