Airbus SE is a European multinational corporation that designs, manufactures, and sells civil and military aeronautical products worldwide. Singapore Airlines (SIA) Ltd. is the flag carrier airline of Singapore. Suppose that Airbus exported an A350 plane to SIA and billed it 350 million Singapore dollar (SGD) payable in one year. Assume the following foreign exchange rates for SGD, and money market interest rates for euros (EUR) and SGD: Exchange Rate Bid Ask Spot rate for SGD 0.6270 EUR 0.6290 EUR On-year forward rate for SGD 0.6160 EUR 0.6180 EUR Interest Rate Bid Ask One-year interest rate for EUR 1.00% 1.10% One-year interest rate for SGD 2.80% 2.90%

(a) Suppose that Airbus hedges its receivable by selling a currency forward contact of 350 million SGD for delivery in one year (at the same time the payment is due), in exchange for a predetermined amount of EUR. If SIA makes payment on it due date and on the maturity date of the forward contract, the spot rate for SGD turns out to be bid 0.6010 EUR and ask 0.6020 EUR (i.e., less than the forward rate of the contract), what is the total EUR amount that Airbus will receive? (b) Suppose that Airbus hedges its receivable using a money market hedge. If SIA makes payment on it due date, what is the total EUR amount that Airbus will receive one year later? (c) Suppose you are the chief financial officer of Airbus. Is there a way for you to make a profit from the given foreign exchange rates and money market interest rates? If there is a way to make a profit, by borrowing either 350 million SGD or 216 million EUR today, explain clearly the order of the transactions that you would execute; and calculate the EUR profit that you would earn. If you cannot make a profit, explain quantitatively why.