Which of the following statements is true?

I) One of the arguments for financial hedging relies on the idea that capital markets may be imperfect. For example, hedging may prevent a situation in which a firm has to raise outside capital at "unfair" prices, for example, because of unfavorable developments in the FX market a firm has to borrow from a bank at an interest rate that is unfairly high given the actual risk of the loan.

II) When a corporation faces progressive income tax (i.e., a convex tax schedule), hedging can potentially create value but reducing expected tax liabilities.

		I only.
		II only.
		I and II.
		None.