Question 3 A. NuEdge Corporation, a US based company, imports raw material from Europe. NuEdge needs 15,000,000 in 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% 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 $.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 $.04 per unit. Required: Which is the best hedging strategy for NuEdge Corporation? Support your conclusion with appropriate calculations. (20 marks) B. 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. (5 marks) Question 3 A. NuEdge Corporation, a US based company, imports raw material from Europe. NuEdge needs 15,000,000 in 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% 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 $.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 $.04 per unit. Required: Which is the best hedging strategy for NuEdge Corporation? Support your conclusion with appropriate calculations. (20 marks) B. 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