1. Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed 20 million payable in one year. The current spot exchange rate is $1.05/ and the one-year forward rate is $1.10/. The annual interest rate is 6% in the United States and 5% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure.

A. It is considering forward market hedge (sell the euro proceeds from the sale forward). Write down the steps of using forward market hedge.

B. What is the expected gain/loss from forward hedging? (make the table as follow) Spot exchange rate on maturity date (ST) Unhedged Position Forward Hedge Gain/Loss from forward hedging $1.00/ $1.05/ $1.10/ $1.20/ $1.30/