Question
Use the following information for the next two questions: Airbus sold an aircraft, A380, to United Airlines, a U.S. company, and billed $80 million payable
Use the following information for the next two questions: Airbus sold an aircraft, A380, to United Airlines, a U.S. company, and billed $80 million payable in 3 months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.10/ and three-month forward exchange rate is $1.08/ at the moment. Airbus can buy a three-month put option on U.S. dollars with a strike price of 0.96/$ for a premium of 0.03 per U.S. dollar. Currently, three-month interest rate is 2.4% (per annum) in the euro zone and 3.2% (per annum) in the U.S. If Airbus decides to hedge using money market hedge, what would be the guaranteed euro proceeds from the American sale (rounded to the nearest )?
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