Boelng just signed a contract to sell a Boelng $737$ alrcraft to Alr France. Alr France will be billed $10\mathrm{.}04$ million payable in one year. The

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

States and $5$ percent In France. Boelng is concerned with the volatlle exchange rate between the dollar and the euro and would like to

hedge exchange exposure.

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

against 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? $($Do not

round Intermedlate calculations. Round your answer to $2$ decimal places.$)$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.

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?