Suppose that the U.S. Boeing Corporation has just exported a Boeing 747 to British Airways and billed 10 million, payable in one year. At the same time, the corporation has also imported several key components for manufacturing the airplanes from Germany and has been billed 10 million, payable in one year. The pounds and euros are very volatile against U.S. dollars, and you need to consider forward, money market, and options hedge.

Consider the below possible exchange rate scenarios for dollar-pound and dollar-euro in one year. The necessary financial data to create the calculations are as follows:

Exchange Rate: Spot Exchange Rate ($/) = 1.50 Spot Exchange Rate ($/) = 1.20

Forward Exchange Rate ($/) - 1 Year = 1.46 Forward Exchange Rate ($/) - 1 Year = 1.18

Call Options ($/): Strike: 1.30 Bid: 0.040 Ask: 0.041

Call Options ($/): Strike: 1.00 Ask: 0.035 Ask: 0.040

Money Market Rates: U.S. interest rate (per annum): 6.10% (Bid) , 6.12% (Ask) U.K. interest rate (per annum): 8.87% (Bid) , 9.00% (Ask) German interest rate (per annum): 8.00% (Bid) , 8.05% (Ask)

1. Can you show what the calculations are to determine: a. Unhedged position b. Hedged position c. Gains/Losses from Hedge