The current spot rate is Won806​/$, and permission has been obtained for a forward rate​ (90 days), Won800​/$. The​ 90-d

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answerhappygod
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The current spot rate is Won806​/$, and permission has been obtained for a forward rate​ (90 days), Won800​/$. The​ 90-d

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The current spot rate is Won806​/$, and permission has been obtained for a forward rate​ (90 days), Won800​/$. The​ 90-day Eurodollar interest rate is 5.750​%, while the​ 90-day Korean won deposit rate​ (there is no​ Euro-won rate) is 4.750​%. KAL can borrow in Korea at 6.500​%, and can probably borrow in the U.S. dollar market at 9.625​%.
A​ three-month call option on dollars in the​ over-the-counter market, for a strike price of Won794​/$ sells at a premium of 3.2%​, payable at the time the option is purchased. A​ 90-day put option on​ dollars, also at a strike price of Won794​/$, sells at a premium of 1.9​%. ​KAL's foreign exchange advisory service forecasts the spot rate in three months to be Won797/$. Assume a​ 360-day financial year. Compare alternate ways below that KAL might deal with its foreign exchange exposure.  
a. How much in Korean won will KAL pay in 90 days without a hedge if the spot rate in 90 days is the same as the expected spot rate of Won797​/$?
b. How much in Korean won will KAL pay in 90 days with a forward market​ hedge?
c. How much in Korean won will KAL pay in 90 days with a money market​ hedge?
d. How much in Korean won will KAL pay in 90 days with an option hedge if the expected spot rate in 90 days is assumed to be greater than Won794​/$?
e. How should KAL plan to make the payment to Boeing if​ KAL's goal is to maximize the amount of won cash left in the bank at the end of the​ three-month period?
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