1. NuEdge Corporation, A US based company, imports raw material from Europe. NuEdge need Euro 15,000,000 in a 1-year period to pay its purchases. The following interest rates are observed:

	Annual Deposit Rate (%)	Annual Lending Rate (%)
European Bank	2.8%	5.4%
US Bank	2.6%	5.8%

• The spot rate for Euro $2.20/
• 12-Month forward rate for Euro $2.30/
• Put Options are available with an exercise price of $2.29, an expiration date of one year from today, and a premium of $0.05 per unit, and call options are available with an exercise price of $2.305, an expiration date of one year from today, and a premium of $0.04 per unit.

Required:

1. Which is the best hedging strategy for NuEdge Corporation? Support your conclusion with appropriate calculations.
2. Explain the difference between a forward contract, a currency strangle and a currency option and describe the best conditions for using each type of derivative.