Chapter 10:

U.S. interest rate (one year) =6.10% U.K. interest rate (one year) =9.00% S=$1.50/ F1=$1.46/ (one-year forward rate) Suppose that Boeing Corporation can also buy a one-year put option on the pound at the strike price of $1.46/ for a premium of 2 cents per pound ($0.02/) Questions: 1. Will Boeing sell or buy its foreign currency receivables forward to eliminate exchange risk exposure? 2. What is the future dollar proceed from this sale using forward hedge if the exchange rate in one year is $1.40/,$1.50/ or $1.60/ ? 3. What is the future dollar proceeds from this sale using money market hedge? 4. What is the future dollar proceed from this sale using option hedge if the spot rate at expiration in one year is $1.30/,$1.40/,$1.50/ or $1.60/