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Delta Airlines has just signed a contract to purchase some A 3 2 0 planes from Airbus for 1 0 0 , 0 0 0
Delta Airlines has just signed a contract to purchase some A planes from Airbus for euros. The payment is due six months or days later. You are in the Treasury department of Delta Airlines and need to make a recommendation to the Treasurer regarding how best to hedge the exchange rate risk of this transaction. You have gathered the following information:
The spot exchange rate is $ That is to say, euro US dollars
The sixmonth forward rate is $
The companys cost of capital is per annum.
The euro month borrowing rate is per annum or for months
The euro month lending rate is per annum or for months
The US dollar month borrowing rate is per annum or for months
The US dollar month lending rate is per annum or for months
The premium on sixmonth call options on the euro with strike price $ is
Suppose Delta Airlines chooses a money market hedge. Spell out the transactions that the firm will need to undertake to implement this hedge. What is the total cost in dollars using this hedge
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