2. As treasurer of Tempe Corp., you are confronted with the following problem. Assume the 1- year forward rate of the British pound is $1.59. You plan to receive 2 million pounds in 1 year. A 1-year put option is available. It has an exercise price of $1.61. The spot rate as of today is $1.62, and the option premium is $.03 per unit. Your forecast of the percentage change in the spot rate was determined from the following regression model: E-= a,ta DINC4-1+a DINT,+u The regression model was applied to historical annual data, and the regression coefficients were estimated as follows: ao = 0.1 ai = 1.1 a2 = 0.5 Assume last year's income level was 3 percent for the United States and 8 percent for the United Kingdom. Also assume that the interest rate differential (DINT:) is forecasted as follows for this year: Forecast of DINT Probability 1% 30% 2% 60% -0.5% 10% Using any of the available information, should the treasurer choose the forward hedge or the put option hedge? Show your work with graph.||