II. Volkswagen requires quite a lot of steel in the production of cars, and hence, the price of steel will influence the earnings of Volkswagen. Therefore, Volkswagen is considering hedging it's exposure to the price of steel. Volkswagen expects that they need to buy 1,000 tons of steel in three months and would like to compare the following three hedging strategies: I. Stay unhedged. Buy a three months futures contract on 1,000 tons of steel with a futures price of $1,300 per ton. III. Buy a European call option on 1,000 tons of steel with an exercise price of $1,200 per ton and maturity in three months. The call option costs $50 per ton steel. Currently the price of steel is $1,200 per ton but Volkswagen is expecting that the price in three months can be anything from $1,000 to $1,600 per ton steel. a) Explain the main differences between futures and options. b) Draw graphs that illustrate the total effect on costs from buying the steel in three months for the three different hedging strategies (y-axis: cost of buying steel, x-axis: price of steel). c) Discuss the main differences between the three different hedging strategies