Boeing 2009 Annual Report Download - page 60

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We have financial instruments that are subject to interest rate risk, principally fixed-rate debt
obligations, and customer financing assets and liabilities. Additionally, BCC uses interest rate swaps
with certain debt obligations to manage exposure to interest rate changes. Exposure to this risk is
managed by generally matching the profile of BCC’s liabilities with that of BCC’s assets in relation to
amount and terms such as expected maturities and fixed versus floating interest rates. As of
December 31, 2009, the impact to BCC’s pre-tax earnings of a 100 basis point immediate and
sustained rise in interest rates would be insignificant for the year ended December 31, 2010.
Historically, we have not experienced material gains or losses on our investments or customer
financing assets and liabilities due to interest rate changes.
Based on the portfolio of other Boeing fixed-rate debt, the unhedged exposure to interest rate risk is
not material. The investors in the fixed-rate debt obligations that we issue do not generally have the
right to demand we pay off these obligations prior to maturity. Therefore, exposure to interest rate risk
is not believed to be material for our fixed-rate debt.
Foreign Currency Exchange Rate Risk
We are subject to foreign currency exchange rate risk relating to receipts from customers and
payments to suppliers in foreign currencies. We use foreign currency forward and option contracts to
hedge the price risk associated with firmly committed and forecasted foreign denominated payments
and receipts related to our ongoing business. Foreign currency forward and option contracts are
sensitive to changes in foreign currency exchange rates. At December 31, 2009, a 10% increase in the
exchange rate in our portfolio of foreign currency contracts would have decreased our unrealized gains
by $136 million and a 10% decrease in the exchange rate would have increased our unrealized gains
by $150 million. At December 31, 2008, a 10% increase in the exchange rate in our portfolio of foreign
currency forward and option contracts would have decreased our unrealized losses by $70 million and
a 10% decrease in the exchange rate would have decreased our unrealized losses by $196 million.
Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such
unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the
remeasurement of the underlying transactions being hedged. When taken together, these forward
currency contracts and the offsetting underlying commitments do not create material market risk.
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