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3) American Airlines is trying to decide how to go about hedging Sfr 70m in...

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3) American Airlines is trying to decide how to go about hedging Sfr 70m in ticket sales receivable in 180 days. Suppose it faces the following exchange and interest rates. Spot rate Forward rate (180 days) SFr 180 day interest rate (annualized) US $ 180 day interest rate (annualized) $0.6433-42/SFr $0.6578-99/SFr 4.01%-3.97% 8.01%-7.98% a) What is the hedged value of American's ticket sales using Forwards? b) What is the hedged value of Americans ticket sales using Money Market? c) Choose the best (Forward or Money Market) 3) American Airlines is trying to decide how to go about hedging Sfr 70m in ticket sales receivable in 180 days. Suppose it faces the following exchange and interest rates. Spot rate Forward rate (180 days) SFr 180 day interest rate (annualized) US $ 180 day interest rate (annualized) $0.6433-42/SFr $0.6578-99/SFr 4.01%-3.97% 8.01%-7.98% a) What is the hedged value of American's ticket sales using Forwards? b) What is the hedged value of Americans ticket sales using Money Market? c) Choose the best (Forward or Money Market)

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