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17) Suppose that Boeing Corporation exported a Boeing 747 to Lufthansa and billed €10 million payable in one year. The money market interest rates and foreign exchange rates are given as follows:Assume that Boeing sells a currency forward contract of €10 million for delivery in one year, in exchange for a predetermined amount of U.S.dollars. Suppose that on the maturity date of the forward contract, the spot rate turns out to be $1.40/€ (i.e. Less than the forward rate of $1.46/€). Which of the following is true?A.Boeing would have received only $14.0 million, rather than $14.6 million, had it not entered into the forward contract.B.Boeing gained $0.6 million from forward hedging.C.Boeing would have received only $14.0 million, rather than $14.6 million, had it not entered into the forward contract. Additionally, Boeing gained $0.6 million from forward hedging.D.none of the options18) Your firm is a U.K.-based exporter of British bicycles. You have sold an order to an Italian firm for €1,000,000 worth of bicycles. Payment from the Italian firm (in €) is due in twelve months. Your firm wants to hedge the receivable into pounds. Not dollars. Use the following table for exchange rate data.Detail a strategy using futures contracts that will hedge your exchange rate risk. Have an estimate of how many contracts of what type.
B.Sell €1m forward using 16 contracts at $1.20 per €1. Buy £750,000 forward using 12 contracts at $1.60 per £1.C.Sell €1m forward using 16 contracts at the forward rate of $1.29 per €1.D.Sell €1m forward using 16 contracts at the forward rate of $1.29 per €1. Buy £750,000 forward using 12 contracts at the forward rate of $1.72 per £1.19) A Japanese exporter has a €1,000,000 receivable due in one year. Spot and forward exchangerate data is given:The one-year risk free rates are i$ = 4.03%; i€ = 6.05%; and i¥ = 1%. Detail a strategy using forward contracts