Suppose That Boeing Corporation Exported a Boeing 747 to British

question 17

Multiple Choice

Suppose that Boeing Corporation exported a Boeing 747 to British Airways and billed £10 million payable in one year. The money market interest rates and foreign exchange rates are given as follows:
The U.S. interest rate: 6.10% per annum
The U.K. interest rate: 9.00% per annum
The spot exchange rate: $1.50/£
The forward exchange rate: $1.46/£ (1-year maturity)
-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 $14.0 million, rather than $14.6 million, had it entered into the forward contract.
• B) Boeing lost $0.6 million from forward hedging.
• C) Boeing gained $0.6 million from forward hedging.
• D) None of these.

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Definitions:

Brain Stem

The part of the brain connecting the spinal cord with the forebrain and cerebrum, responsible for controlling several vital functions.

Midbrain

A portion of the central nervous system associated with vision, hearing, motor control, sleep/wake, arousal (alertness), and temperature regulation.

Occipital Area

The region at the back of the brain which is primarily responsible for visual processing.

Hypothalamus

A small region at the base of the brain crucial for hormone production and regulation, influencing body temperature, hunger, mood, and more.