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$7,600$ million.$$Won$1,000$ million has already

been$$paid$,$ and the remaining Won$6,600$ million is due in six

months. The current spot rate is Won$1,112/$$$,$ and the$6-$month

forward rate is Won$1,177/$$$.$ The$6-$month Korean won interest

rate is $16\mathrm{.}5\%$ 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$1,200/$$ strike rate has a $3\mathrm{.}8\%$

$$premium$,$ while the$6-$month put option at the same strike

rate has a $3\mathrm{.}2\%$ premium. Bobcat can invest at the rates

given$$above$,$ or borrow at$2\%$ per annum above those

rates.$$Bobcat$\text{'}$s weighted average cost of capital is $12\%.$

Compare alternate ways below that Bobcat might deal with its

foreign exchange exposure.a$.$ How much in U$.$S$.$ dollars will Bobcat pay in $6$ months without

a hedge if the expected spot rate in $6$ months is assumed to be

Won$1,112/$$$?$Won$1,177/$$$?$b$.$ How much in U$.$S$.$ dollars will Bobcat pay in $6$ months with a

forward market$$hedge$?$c$.$ How much in U$.$S$.$ dollars will Bobcat pay in $6$ months with a

money market$$hedge$?$d$.$ How much in U$.$S$.$ dollars will Bobcat pay in $6$ months with an

option hedge if the expected spot rate in $6$ months is assumed to be

less than Won$1,200/$$$?$To be Won$1,300/$$$?$e$.$ What do you$$recommend$?$