Central Valley Transit Inc. (CVT) has just signed a contract to purchase light rail cars from a manufacturer in Germany for euro 3,000,000. The purchase was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in euros rather than dollars, CVT is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exchange rate is $1.250/euro The six month forward rate is $1.22/euro CVT's cost of capital is 11% The Euro zone 6-month borrowing rate is 9% (or 4.5% for 6 months) The Euro zone 6-month lending rate is 7% (or 3.5% for 6 months) The U.S. 6-month borrowing rate is 8% (or 4% for 6 months) The U.S. 6-month lending rate is 6% (or 3% for 6 months) December call option for the euro; strike price $1.28, premium price is 1.5% CVT's forecast for 6-month spot rates is $1.27/euro If CVT chooses to hedge in the FOREX option market and the spot exchange rate is $1.30/euro in December (at maturity), what will be value of the combined (spot and option) position? -$3,956,250 -$3,896,250 -$3,957,600 -$3,960,000.