Question
Boeing (American company) has sold 1 airplane to Air France (EU). The price of an airplane is the equivalent of 10 million USD today, but
Boeing (American company) has sold 1 airplane to Air France (EU). The price of an airplane is the equivalent of 10 million USD today, but the invoice currency is that of the airlines home currency. The payment is due 1 year from now.
Boeing should buy/sell _________ Euros forward
How much will Boeing receive, 1 year from now, if it hedges using the Forward contract?
If Boeing decides not to hedge, how much will the EUR payment made by Air France be worth if the spot exchange rate 1 year from now is S(EUR/USD) = 1.05? What if it is S(EUR/USD) = 0.8?
Please show work
EUR/USD Boeing's dealer bank quotes Spot price 0.9 1-year Forward 0.89Step by Step Solution
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