In January 2016, Lufthansa, a German airline, purchased twenty 737 jets from the American company. Boeing...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In January 2016, Lufthansa, a German airline, purchased twenty 737 jets from the American company. Boeing for a total cost of USD 500 million to be paid on the delivery of the jets in January 2017. The chairman of Lufthansa believed that the dollar had run out and would shortly run down. The following options are available to him. [10 Marks] CO 2 & 3 a. Be conservative. Cover the whole payable forward. b. Trust his instincts. Buy the dollar forward in January 2017. e. Buy USD now and hold them in a deposit for a year to settle the payable in January 2017. d. Based on the information given below, which option would have minimized Lufthansa's cashflows at the end of the year:- Spot rate EUR/USD: 1.0861 Fwd rate EUR/USD: 1.0901 Spot rate after a year: 1.0870 I year interest rate on dollars = 3.5% I year interest rate on Euro = 2.8%. In January 2016, Lufthansa, a German airline, purchased twenty 737 jets from the American company. Boeing for a total cost of USD 500 million to be paid on the delivery of the jets in January 2017. The chairman of Lufthansa believed that the dollar had run out and would shortly run down. The following options are available to him. [10 Marks] CO 2 & 3 a. Be conservative. Cover the whole payable forward. b. Trust his instincts. Buy the dollar forward in January 2017. e. Buy USD now and hold them in a deposit for a year to settle the payable in January 2017. d. Based on the information given below, which option would have minimized Lufthansa's cashflows at the end of the year:- Spot rate EUR/USD: 1.0861 Fwd rate EUR/USD: 1.0901 Spot rate after a year: 1.0870 I year interest rate on dollars = 3.5% I year interest rate on Euro = 2.8%.
Expert Answer:
Answer rating: 100% (QA)
d Lufthansas Cashflow would be minimized when they Buy USD now and hel... View the full answer
Related Book For
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-1259692406
18th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
Posted Date:
Students also viewed these accounting questions
-
The Mayer and Rodin partnership agreement stipulates that profits and losses will be shared equally after salary allowances of $390,000 for Mayer and $202,000 for Rodin. At the beginning of the year,...
-
BR Inc. owns a 20 percent interest in a limited partnership. All the other partners are individual shareholders in BR. This year, BR sold land to the partnership for use in the partnership's business...
-
Powell owns a 20 percent interest in Cooke Partnership. At the beginning of 2019, Powells basis is $22,000. Cooke reports a $90,000 operating loss in 2019, and Powell withdraws $10,000 from the...
-
Prepare journal entries to record the following grant-related transactions of an enterprise fund activity. Explain how these transactions should be reported in the enterprise funds financial...
-
If you were a recruiter for a hotel organization, what would be among the most important factors you would consider as you recruited management trainee applicants?
-
The head of the accounting department at a major software manufacturer has asked you to put together a pro forma statement of the companys value under several possible growth scenarios and the...
-
The accountant for Fast Deliveries Ltd accumulates the following data concerning a mixed cost using kilometres as the activity level. Required Compute the fixed and variable cost elements using the...
-
Suppose Congress enacted new tax law changes that would (1) permit equipment to be depreciated over a shorter period, (2) lower corporate tax rates, and (3) reinstate the investment tax credit....
-
The future price of Gold for August 2022 delivery is $1,920. Future contracts are for 100 ounce of gold and assume that the margin requirement is $6,000 per contract and the maintenance margin...
-
An acetoneethanol mixture of 0.5 mole fraction acetone is to be separated by batch distillation at 101 kPa. Vaporliquid equilibrium data at 101 kPa are as follows: (a) Assuming an L=D of 1.5 times...
-
B. Multiple Choice 1) Which of the following IS NOT required for PCR? a. DNA Polymerase b. dNTPs C. Helicase d. Primers e. None of the above (all are required) 2) Which IS NOT true about...
-
Explain why system is tested for impulse and step inputs.
-
The following data are taken from the comparative balance sheets of Cascade Billiards Club, which prepares its financial statements using the accrual basis of accounting. Members are billed based...
-
A triangular pulse signal \(x(t)\) is shown in Fig. 1.77a. Sketch the following signals. (a) \(x(4 t)\); (b) \(x(4 t+3)\); (c) \(x(-3 t+2)\); (d) \(x\left(\frac{t}{3}+2ight)\); (e) \(x(3 t-2)\); (f)...
-
Action Quest Games Inc. adjusts its accounts annually. The following information is available for the year ended December 31, 2019. 1. Purchased a 1-year insurance policy on June 1 for $1,800 cash....
-
Southern Californian Scott Robinson had quite a rsum when he returned from studying in France last Christmas. The 26-year-old had an undergraduate degree from Bucknell University, two MBAs, and...
-
The number of girls at a small high school is 60 greater than the number of boys. If there are 1250 total students, how many girls are there?
-
Proposals have been made to ?sail? spacecraft to the outer solar system using the pressure of sunlight, or even to propel interstellar spacecraft with high-powered, Earth-based lasers. Sailing...
-
The controller of Maxwell Department Store is preparing an income statement divided by sales departments and including subtotals for contribution margin , performance margin, and responsibility...
-
MURDER TO GO! writes and manufactures murder mystery parlor games that it sells to retail stores. The following is per-unit information relating to the manufacture and sale of this product: Unit...
-
Holiday Greeting Cards is a local company organized late in July of 2017. The company's net income for each of its first six calendar quarters of operations is summarized as follows. (Amounts are...
-
Find each probability using the standard normal distribution. (a) \(P(z>-1.68)\) (b) \(P(z <2.23)\) (c) \(P(-0.47
-
Find the probability that a randomly selected person has an IQ score between 95 and 105. Is this an unusual event? Explain. In a standardized IQ test, scores are normally distributed, with a mean...
-
The random variable \(x\) is normally distributed with the given parameters. Find each probability. (a) \(\mu=9.2, \sigma \approx 1.62, P(x <5.97)\) (b) \(\mu=87, \sigma \approx 19, P(x>40.5)\) (c)...
Study smarter with the SolutionInn App