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Suppose that Boeing Corporation exported a Boeing 737 Max to Lufthansa and billed 10 million payable in one year. The money market interest rates and
Suppose that Boeing Corporation exported a Boeing 737 Max to Lufthansa and billed 10 million payable in one year. The money market interest rates and foreign exchange rates are given as follows:
The U.S. one year interest rate: | 6.10 | % per annum |
The euro zone one year interest rate: | 9.00 | % per annum |
The spot exchange rate: | $1.50/ | |
The one year forward exchange rate: | $1.46/ |
Assume that Boeing sells a currency forward contract of 10 million for delivery in one year. Which of the following is/are true? On the maturity date of the contract
- Boeing will have to deliver 10 million to the bank.
- Boeing will take delivery of $14.6 million
- Boeing will have a zero net euro exposure
- Boeing will have a profit, or a loss, depending on the future changes in the exchange rate, from this British sale.
Group of answer choices
(ii), (iii), and (iv)
(i) and (ii)
(i) and (iv)
(i), (ii), and (iii)
(ii) and (iv)
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