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Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €20.16 million payable in one year. The current spot exchange rate is $1.09/€ and the one-year forward rate is $1.14/€. The annual interest rate is 10 percent in the United States and 9 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 Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €20.16 million payable in one year. The current spot exchange rate is $1.09/€ and the one-year forward rate is $1.14/€. The annual interest rate is 10 percent in the United States and 9 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
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1 Amount receivable under farward hedge amount receiva... View the full answer
Related Book For
International Financial Management
ISBN: 978-0078034657
6th Edition
Authors: Cheol S. Eun, Bruce G.Resnick
Posted Date:
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