Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. AirFrance will be billed €20 million which is payable in one year. The current spotexchange rate is $1.05/€ and the one-year...

Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. AirFrance will be billed €20 million which is payable in one year. The current spotexchange rate is $1.05/€ and the one-year forward rate is $1.10/€. The annualinterest rate is 6.0% in the U.S. and 5.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like tohedge exchange exposure.a) It is considering two hedging alternatives: sell the euro proceeds fromthe sale forward or borrow euros from the Credit Lyonnaise against theeuro receivable. Which alternative would you recommend? Why?[10 marks]b) Other things being equal, at what forward exchange rate would Boeingbe indifferent between the two hedging methods?