Bobcat Company. Bobcat Company, U$.$S$.-$based manufacturer of industrial equipment,

just purchased a Korean company that produces plastic nuts and bolts for heavy

equipment. The purchase price was Won$7,500$ million. Won$1,000$ million has already

been paid, and the remaining Won$6,500$ million is due in six months. The current spot

rate is Won $1,\frac{110}{\text{\$}},$ and the $6-$month forward rate is Won $1,\frac{175}{\text{\$}}.$ The $6-$month Korean

won interest rate is $16\%$ per annum, the $6-$month U$.$S$.$ dollar rate is $4\%$ per annum.

Bobcat can invest at these interest rates, or borrow at $2\%$ per annum above those rates.

A $6-$month call option on won with a Won $1,\frac{200}{\text{\$}}$ strike rate has a $3\mathrm{.}0\%$ premium, while

the $6-$month put option at the same strike rate has a $2\mathrm{.}4\%$ premium.

Bobcat can invest at the rates given above, or borrow at $2\%$ per annum above those

rates. Bobcat's weighted average cost of capital is $10\%.$ Compare alternate ways that

Bobcat might deal with its foreign exchange exposure. What do you recommend and

why?