Math Solutions

(Solved) Assume Boeing hedges the potential FX transaction risk through a Currency Forward Contract Hedge. In other words, the company "sells 'Forward'"

Question: Assume Boeing hedges the potential FX transaction risk through a Currency Forward Contract Hedge. In other words, the company "sells 'Forward'" the receivable from Lufthansa at the prevailing Forward Rate:

  1. What would this Currency Forward Contract Hedge cost Boeing?
  2. What would be the FX gain/loss if Boeing purchased the Currency Forward Contract Hedge and the spot rate increased to $1.30 in 12 months?
  3. What would be the FX gain/loss if Boeing purchased the Currency Forward Contract Hedge and the spot rate decreased to $1.00 in 12 months?

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Solution: The downloadable solution consists of 1 pages
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