Boeing just signed a contract to sell a Boeing $737$ aircraft to Air France. Air France will be billed $10\mathrm{.}04$ million payable in one year. The current spot exchange rate is $$1\mathrm{.}05/$ and the one$-$year forward rate is $$1\mathrm{.}10/.$ The annual interest rate is $6$ percent in the United States and $5$ percent in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure.Boelng just signed a contract to sell a Boeing $737$ alrcraft to Alr France. Alr France will be billed $10\mathrm{.}08$ million payable In one year. The

current spot exchange rate is $$1\mathrm{.}05$ per euro and the one$-$year forward rate is $$1\mathrm{.}10$ per euro. The annual Interest rate is $6$ percent in

the United States and $5$ percent In France. Boelng is concerned with the volatile exchange rate between the dollar and the euro and

would like to hedge exchange exposure.

Required:

a$.$ It Is considering two hedging alternatlves: sell the euro proceeds from the sale forward or borrow euros from Credit Lyonnalse

agalnst the euro recelvable. Which alternatlve would you recommend?

b$.$ Other things being equal, at what forward exchange rate would Boelng be Indifferent between the two hedging methods?

Complete this question by entering your answers in the tabs below.

It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borrow euros from Cr$$dit Lyonnaise

against the euro receivable. Which alternative would you recommend?

Note: Enter your Forward hedge and Money market hedge answers in whole dollars not in millions.