Finance Assignment | Professional Writing
May 29th, 2020
2. On January 1 2010, BOEING is awarded a contract to supply one Boeing 777 to Air France-KLM. On July 1, BOEING will receive a payment of €183 for this sale. BOEING has decided to use Money Market Hedge in order to manage transaction exposure. Assume euro interest rate is 15% (annualized) and exchange rate in January 1, 2010 is 1.06$/€. a. What is the US dollar interest rate?
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b. At which exchange rate in 07-01-2010 the Gain (Loss) on Money Market Hedge will be 0? Spot exchange rate scenarios (07-01-2010) $ Value of Original Receivable (million $) 183 Gain & (Loss) Money on Market Hedge (millions $) 6.46 TOTAL CASH FLOW (millions) 1 € = 1$ 1 € = 0.95$ 1€ = 1.1$ 1€ = 0.89$ 1€ = 1.5$
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