Suppose that Boeing (US company) sold airplane to Lufthansa (German company) on credit and invoiced €20 million payable in six months. Two companies agree to share the currency risks. In the Price Adjustment Clause, the neutral zone is $1.14/€ - $1.26/€, the base rate is $1.2/€; and both parties will share the currency risk beyond a neutral zone. How much each party have to pay/receive if:
How much each party have to pay/receive if the exchange rate is $1.17/€
a. Boeing receives $20 million; Lufthansa pays €17.094 million.
b. Boeing receives $23.4 million; Lufthansa pays €20 million.
c. Boeing receives $20 million; Lufthansa pays €20 million.
d. Boeing receives $24 million; Lufthansa pays €20 million.
| As the exchange rate at the time of payment is within the |
| neutral zone, the rate payable is the base rate of $1.2/Euro. |
| Boeing receives 20*1.17 = $23.4 million and Lufthansa pays Euro 20 million |
| Option [b] |
Suppose that Boeing (US company) sold airplane to Lufthansa (German company) on credit and invoiced €20...
Suppose that Boeing (US company) sold airplane to Lufthansa (German company) on credit and invoiced €20 million payable in six months. Two companies agree to share the currency risks. In the Price Adjustment Clause, the neutral zone is $1.14/€ - $1.26/€, the base rate is $1.2/€; and both parties will share the currency risk beyond a neutral zone. How much each party have to pay/receive if: How much each party have to pay/receive if the exchange rate is $1.17/€ a....
Suppose that Boeing (US company) sold airplane to Lufthansa (German company) on credit and invoiced €20 million payable in six months. Two companies agree to share the currency risks. In the Price Adjustment Clause, the neutral zone is $1.14/€ - $1.26/€, the base rate is $1.2/€; and both parties will share the currency risk beyond a neutral zone. How much each party have to pay/receive if: How much each party have to pay/receive if the exchange rate is $1.32/€? a....
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