(a) Keep the number of put options Megatron buys fixed at 250 million put options on EU and 175 million put options on BP. Megatron is considering the following 4 potential strike prices for EU: $1.20, $1.24, $1.28, and $1.32; and the following 4 potential strike prices for BP: $1.20, $1.30, $1.40 and $1.45. Evaluate all 16 options (on the criteria maximize the probability that the earnings are above $706 million) and select the best combination. Is the best combination better than not hedging (i. e. is Megatron better off not buying any put options)

Verizon communications, inc., provides the following footnote relating to its leasing activities in its 10-k report. the aggregate minimum rental commitments under noncancelable leases for the periods shown at december 31, 2010, are as follows: years (dollars in millions) capital leases operatingleases 2011 $97 $1,898 2012 74 1,720 2013 70 1,471 2014 54 1,255 2015 42 1,012 thereafter 81 5,277 total minimum 418 $ 12,633 rental commitments less interest and (86) executory costs present value of 332 minimum lease payments less current (75) installments long-term obligation $257 at december 31, 2010 (a) confirm that verizon capitalized its capital leases using a rate of 7.4 %. (b) compute the present value of verizon's operating leases, assuming an 7.4% discount rate and rounding the remaining lease term to 3 decimal places. (use a financial calculator or excel to compute. do not round until your final answers. round each answer to the nearest whole number.)