a. It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against the euro receivable. Which alternative would you recommend? Forward hedgo Money market hedge Recommend alternative i
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- Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €19 million which is payable in one year. The current EUR/USD rate is 1.0651 and the one-year forward rate is 1.0898. The annual interest rate is 4.9% in the U.S. and 2.7% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. It is considering to hedge borrowing euros from Credit Lyonnaise against the euro receivable. How much will they receive in one year? (USD, no cents) The answer is 20,670,407 I cannot figure out how. Thanks!Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €17 million which is payable in one year. The current EUR/USD rate is 1.0559 and the one-year forward rate is 1.0747. The annual interest rate is 4.2% in the U.S. and 1.4% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. It is considering to hedge borrowing euros from Credit Lyonnaise against the euro receivable. How much will they receive in one year? (USD, no cents)Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €10.12 million payable in one year. The current spot exchange rate is $1.05 per euro and the one-year forward rate is $1.10 per euro. The annual interest rate is 6 percent in the United States and 5 percent in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. Required: a. It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against the euro receivable. Which alternative would you recommend? b. Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods? Complete this question by entering your answers in the tabs below. Required A Required B It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against…
- Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €10.14 million payable in one year. The current spot exchange rate is $1.07 per euro and the one-year forward rate is $1.12 per euro. The annual interest rate is 8 percent in the United States and 7 percent in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. Required: a. It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against the euro receivable. Which alternative would you recommend? b. Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods? Complete this question by entering your answers in the tabs below. Required A Required B It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against…Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €10.04 million payable in one year. The current spot exchange rate is $1.05/€ and the one-year forward rate is $1.10/€. The annual Interest rate is 6 percent in the United States and 5 percent in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. a. It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against the euro receivable. Which alternative would you recommend? Forward hedge Money market hedge Recommend alternative b. Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Forward exchange rateBoeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €20.08 million payable in one year. The current spot exchange rate is $1.05/€ and the one-year forward rate is $1.10/€. The annual interest rate is 6 percent in the United States and 5 percent in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. a. It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against the euro receivable. Which alternative would you recommend? Forward hedge Money market hedge Recommend alternative Forward hedge b. Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Forward exchange rate
- Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €20.18 million payable in one year. The current spot exchange rate is $1.11 per euro and the one-year forward rate is $1.16 per euro. The annual interest rate is 12 percent in the United States and 11 percent in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. Required: a. It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against the euro receivable. Which alternative would you recommend? b. Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods? Complete this question by entering your answers in the tabs below. Required A Required B It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Crédit Lyonnaise against…Airbus has a foreign-currency denominated payable, it can hedge by buying the foreign currency payable forward. The company can expect to eliminate the exposure without incurring costs as long as the forward exchange rate is an unbiased predictor of the future spot rate. Airbus exported an A380 to a UK company, and was billed the sum of £ 12,000,000 payable in three months. Currently the spot rate is $1.40/£ and the three-month forward rate is $1.36/£.The three-month money market interest rate is 12% per annum in US and 8% per annum in UK.So the management of Airbus decided to manage this transaction exposure and use the money market hedge to deal with this pound account payable. Explain how Airbus can eliminate the exchange rate exposureBusco has a foreign-currency denominated payable, it can hedge by buying the foreign currency payable forward. The company can expect to eliminate the exposure without incurring costs as long as the forward exchange rate is an unbiased predictor of the future spot rate. Bus Co exported an A350 to a UK business, and was billed the sum of £11,000,000 payable in three months. Currently the spot rate is $1.30/£ and the three-month forward rate is $1.26/£.The three-month money market interest rate is 11% per annum in US and 7% per annum in UK.So the management of Busco decided to manage this transaction exposure and use the money market hedge to deal with this pound account payable. (i) Show how Busco can eliminate the exchange rate exposure by computing the dollar cost of meeting the pound obligation. ii)Conduct a cash flow analysis of the money market hedge.
- Dune Ltd. is an Irish company which will pay CAN$609,000 to a supplier in Toronto in three months time. The spot rate of exchange today is CAN$1.45 = €1. In three-month forward contracts, the Canadian dollar is at a discount of CAN$0.05 against the €. Dune Ltd. has decided to hedge its foreign currency risk in relation to the CAN$609,000 payment using a three-month forward contract. How much will Dune Ltd. pay in € to purchase the CAN$609,000 under the forward contract? €406,000 €420,000 €435,000 None of the aboveAirbus sold an A400 aircraft to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned about the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is 1.05 $/euro and the six-month forward rate exchange rate is 1.10 $/euro. Airbus can buy a six-month put option on U.S. dollars with a strike price of 0.95 euro/$ for a premium of .02 euro per U.S. dollar. Currently, the six-month interest rate is 2.5% in the euro zone and 3% in the United States. Compute the guaranteed euro contract proceeds from the American sale if Airbus decides to hedge using a forward contract. If Airbus decides to hedge using money market instruments, what action does Airbus need to take? What would be the guaranteed euro proceeds from the American sale in this case? If Airbus decides to hedge using put options on U.S. dollars, what would be the “expected” euro proceeds from the American sale? Assume that…BK Inc. has $100,000 that can be used for arbitrage in the forex market. The interest rate is US is 4% and in Europe is 5%. The current exchange rate USD to EUR is 0.87. The company expects that after a year, the exchange rate may not be favourable and executes a forward contract at EUR to USD 1.23. Calculate the net profit or loss of this covered interest arbitrage if the investment is made in Europe. Answer Choices: a. The net profit is $8,360.50 The net loss is $4,000.00 b. c. The net profit is $5,360.50 d. The net loss is $1,000.00