3. Boeing Corporation has just signed a contract to buy a jet engine from Rolls Royce in the United Kingdom for 5,000,000. Payment is due in 6 months. Boeing is considering several hedging alternatives to reduce the exchange rate risk arising from the purchase. To help Boeing make a hedging decision you have gathered the following information The spot exchange rate is $1.50E The six-month forward rate is $1.52/6 The UK 6-month borrowing rate is 9% (or 4.5% for 6 months) The UK 6-month lending rate is 7% (or 3.5% for 6 months) The U.S. 6-month borrowing rate is 8% (or 4% for 6 months) The US. 6-month lending rate is 6% (or 3% for 6 months) For call options on pounds: strike price $1.51; premium is $0.015 per pound Boeing's forecast for 6-month spot rates is $1.53/ Suppose the exchange rate is very volatile and the company is very risk averse. What would you recommend to Boeing? (4 marks)