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Suppose that Boeing Corporation exported a Boeing 747 to Lufthansa and billed 10 million payable in one year. The money market interest rates and foreign

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Suppose that Boeing Corporation exported a Boeing 747 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: The euro zone one-year interest rate: The spot exchange rate: The one-year forward exchange rate 6.10 % per annum 9.00 % per annum $ 1.50 7 $ 1.46 7 Assume that Boeing sells a currency forward contract of 10 million for delivery in one year, in exchange for a predetermined amount of U.S. dollars. Which of the following is/are true? On the maturity date of the contract Boeing will: () have to deliver 10 million to the bank (the counter party of the forward contract). (ii) take delivery of $14.6 million (iii) have a zero net euro exposure (IV) have a profit, or a loss, depending on the future changes in the exchange rate, from this British sale. (ii) and (iv) (i) and (iv) (i), (ii), and (iii) (ii), (iii), and (iv)

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