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Economics and currency




Case Questions;Herr Ruhnau was accused of making the following four mistakes;1. Purchasing the Boeing aircraft at the wrong time. The U.S. dollar was at an all-time high at the;time of the purchase, in January of 1985.;2. Choosing to hedge half the exposure when he expected the dollar to fall. If he had gone through;with his instincts or expectations, he would have left the whole amount unhedged (which some;critics have termed ?whole hog?).;3. Choosing to use forward contracts as his hedging tool instead of options. The purchase of put;options would have allowed Herr Ruhnau to protect himself against adverse exchange rate move-;ments while preserving the flexibility of exchanging DM for dollars spot if preferred.;4. Purchasing Boeing aircraft at all. Germany, as well as the other major European Economic;Community countries, has a vested interest in the conglomerate Airbus. Airbus?s chief rival was;Boeing in the manufacture of large long-distance civil aircraft.;Given these criticisms, should the Board of Lufthansa retain Herr Heinz Ruhnau as Chairman?;How should Ruhnau justify his actions and so justify his further employment?


Paper#17849 | Written in 18-Jul-2015

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