Suppose that Boeing (US company) sold airplane to Lufthansa (German company) on credit and invoiced 20 million
Question:
Suppose that Boeing (US company) sold airplane to Lufthansa (German company) on credit and invoiced €20 million payable in six months. Two companies agree to share the currency risks. In the Price Adjustment Clause, the neutral zone is $1.14/€ - $1.26/€, the base rate is $1.2/€; and both parties will share the currency risk beyond a neutral zone. How much each party have to pay/receive if:
How much each party have to pay/receive if the exchange rate is $1.17/€
a. Boeing receives $20 million; Lufthansa pays €17.094 million.
b. Boeing receives $23.4 million; Lufthansa pays €20 million.
c. Boeing receives $20 million; Lufthansa pays €20 million.
d. Boeing receives $24 million; Lufthansa pays €20 million.
International Financial Management
ISBN: 978-0078034657
6th Edition
Authors: Cheol S. Eun, Bruce G.Resnick