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.dollar.Which of the following is (or are) true? On the maturity date of the contract Boeing will:
(i) have to deliver €10 million to the bank (the counterparty of the forward contract)
(ii) take delivery of $14.6 million
(iii) have a zero net pound exposure
(iv) have a profit,or a loss,depending on the future changes in the exchange rate,from this British sale
A) (i) and (iv)
B) (ii) and (iv)
C) (ii) , (iii) , and (iv)
D) (i) , (ii) , and (iii)
Correct Answer:
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