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

the United States and $5$ percent in France. Boeing 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 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?

b$.$ Other things being equal, at what forward exchange rate would Boeing 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.