Airbus sold an A400 aircraft to Delta Airlines, a U.S. company, and billed $30 million pay-...

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Airbus sold an A400 aircraft to Delta Airlines, a U.S. company,and billed $30 million pay- able in six months. Airbus is concernedabout the euro proceeds from international sales and would like tocontrol exchange risk. The current spot exchange rate is $1.05/€and the six-month forward exchange rate is $1.10/€. Airbus can buya six-month put option on U.S. dollars with a strike price of€0.95/$ for a premium of €0.02 per U.S. dollar. Currently, six-month interest rate is 2.5 percent in the euro zone and 3.0 percentin the United States.
Should a firm hedge? Why or why not?

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Airbus sold an A400 aircraft to Delta Airlines, a U.S. company,and billed $30 million pay- able in six months. Airbus is concernedabout the euro proceeds from international sales and would like tocontrol exchange risk. The current spot exchange rate is $1.05/€and the six-month forward exchange rate is $1.10/€. Airbus can buya six-month put option on U.S. dollars with a strike price of€0.95/$ for a premium of €0.02 per U.S. dollar. Currently, six-month interest rate is 2.5 percent in the euro zone and 3.0 percentin the United States.Should a firm hedge? Why or why not?