Suppose That Boeing Corporation Exported a Boeing 747 to British

question 6

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)
-Assume that Boeing sells a currency forward contract of £10 million for delivery in one year,in exchange for a given amount of U.S.dollar.Which of the following is all true?
On the maturity date of the contract Boeing will
(i) - have to deliver £10 million to the bank (the counterparty of the 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), (iv)
• D) (i), (ii), (iii)

---

Definitions:

Sequential Game

A sequential game is a type of game in game theory where players make decisions or select strategies one after another, with knowledge of the previous players' actions.

Monopolized

Refers to a market situation where a single company or entity has exclusive control over a particular good or service.

Simultaneous Game

A type of game in game theory where players make their moves without knowledge of the other players' actions.

Discourage

To dissuade or deter someone from taking a particular action or continuing a certain behavior by instilling doubt or fear of consequences.