VT Power Generation, Inc., a Virginia-based electric utility, has agreed to buy two gas turbines from Rolls Royce at a price of 10 million per turbine. Payment is due upon delivery, one (1) year from today. You are VT's Treasurer. You have following quotes. Spot FX (Foreign exchange) rate: One year forward FX rate: obtained the $1.5000/ One year $ interest rate: One year interest rate: One year call option (on ) w/strike $1.500/: You are considering three possible strategies. $1.5218/ 4.50% 3.00% $0.0691/ i) Hedge using the forward market. ii) Hedge using the money market. 1. iii) Hedge using the options market. Focus first on the forward market and the money market. Which of these two alternatives do you prefer and why? 2. Choose the strategy you think is best. What reason will you give the CEO for choosing this strategy? You must include a sound economic reason to get full credit! (For each hedging strategy, be sure to calculate the expected cash flows both today and in one year.)