Suppose that the U.S. Boeing Corporation has just imported several key components for manufacturing the airplanes from Germany and has been billed 10 million, payable in one year. The Assistant Treasurer at the Corporation oversees finding ways to hedge its foreign currency risk of euros. Lately, the euros are very volatile against U.S. dollars. He is considering forward, money market, and options hedge. The Assistant Treasurer just finished collecting the spot, forward, and currency options quotes from the Bloomberg terminal, which are as follows:

Spot exchange rate ($/): 1.20

Forward exchange rate ($/) 1 year: 1.18

U.S. interest rate (p.a.): 6.10% bid, 6.12% ask

German interest rate (p.a.): 8.00% bid, 8.05% ask

1. For each of the five possible exchange rate scenarios for dollar-euro, please provide the calculations and answers for:
   1. Forward Market Hedge (that is, the Unhedged Position, Hedged Position and Gains/Losses from Hedge)
   2. Money Markets Hedge
   3. Options Market Hedge (that is, Exercise Decision, Gross Dollar Proceeds, Option Cost and Net Dollar Proceeds)

2. Determine what the best strategy would be for the corporation to consider

\begin{tabular}{|l|l|l|} \hline \multicolumn{3}{|c|}{ Call options (S/ )} \\ \hline Strike & Bid & Ask \\ \hline 1.00 & 0.035 & 0.040 \\ \hline 1.10 & 0.031 & 0.035 \\ \hline 1.18 & 0.026 & 0.030 \\ \hline 1.20 & 0.020 & 0.025 \\ \hline 1.30 & 0.018 & 0.020 \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \multicolumn{3}{|l|}{ Put options (\$/) } \\ \hline Strike & Bid) & Ask \\ \hline 1.00 & 0.020 & 0.021 \\ \hline 1.10 & 0.022 & 0.024 \\ \hline 1.18 & 0.024 & 0.029 \\ \hline 1.20 & 0.029 & 0.031 \\ \hline 1.30 & 0.035 & 0.038 \\ \hline \end{tabular}