Air France KLM has just signed a contract to purchase a Boeing 737 aircraft. Air France KLM will be billed USD20 million which is payable in 180 days. The current spot exchange rate is USD1.2000/EUR and its bank Credit Lyonnaise quotes a 180-day forward rate of USD1.2010/EUR. The 180-day interest rate is 2.5% pa. in the US. and 1.0% in France. Air France KLM is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge the FX exposure. a It is considering two hedging alternatives: a forward contract or a money market hedge. Which alternative would you recommend? Why? b Other things being equal, at what annualised EUR interest rate would Air France KLM be indifferent between the two hedging methods