Airbus Q: A$/$R

Airbus sold an aircraft, A$400,$ 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 $$1\mathrm{.}05$ and six$-$month forward exchange rate is $$1\mathrm{.}10$

at the moment. Airbus can buy a six$-$month put option on U$.$S$.$ dollars with a strike price of $\frac{0\mathrm{.}95}{\text{\$}}$ for a

premium of $0\mathrm{.}02$ per U$.$S$.$ dollar. Airbus can buy a six$-$month call option on U$.$S$.$ dollars with a strike price

of $\frac{0\mathrm{.}85}{\text{\$}}$ for a premium of $0\mathrm{.}03$ per U$.$S$.$ dollar. In addition, Airbus can buy a six$-$month put option on

U$.$S$.$ dollars with a strike price of $\frac{0\mathrm{.}95}{\text{\$}}$ for a premium of $0\mathrm{.}02$ per U$.$S$.$ dollar. Currently, six$-$month

interest rate is $2\mathrm{.}5\%(5\%$ per annum$)$ in the euro zone and $3\mathrm{.}0\%(6\%$ per annum$)$ in the U$.$S$.$

Use euro zone interest for FV calculation.

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.