If boeing decides to use options to hedge the foreign, Financial Management

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If boeing decides to use options to hedge the foreign

Boeing imported a Rolls-Royce jet engine for £10 mil payable in one year.

• The US interest rate is 3.00% per annum

• The UK interest rate 3.25% per annum

• The Spot exchange rate $1.80/£

• The Option strike price is $1.70/£ (option matures in one year)

• Option premium is $0.02/£

If Boeing decides to use options to hedge the foreign exchange exposure, which type of options should the company use, put or call?

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Financial Management: If boeing decides to use options to hedge the foreign

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Financial Management: If boeing decides to use options to hedge the foreign

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