a. Compute the guaranteed euro proceeds from the American sale if Airbus decides to hedge using a forward contract.
b. If Airbus decides to hedge using money market instruments, what action does Airbus need to take? What would be the guaranteed euro proceeds from the American sale in this case?
c. If Airbus decides to hedge using put options on U.S. dollars, what would be the "expected" euro proceeds from the American sale?
Assume that Airbus regards the current forward exchange rate as an unbiased predictor of the future spot exchange rate.
d. At what future spot exchange do you think Airbus will be indifferent between the option and money market hedge?
e. Calculate the guaranteed payments, expected payments and future spot rate.
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