KAL and Boeing. Korean Airlines $($KAL$)$ has just signed a contract with Boeing to purchase fwo ncw $747-4005$ for a total of USD$64,000,000,$ with payment in two equal tranches. The first tranche of USD$32,000,000$ has just been paid. The next USD$32,000,000$I is due three moniths from loday KAL currently has excess cash of $26,000,000,000$ Korean won $($KRW$)$ in a Seoul bank, and it is from these funds that KAL plans to make its next payment:

The current spot rate is KRW$794=$ USD$100,$ and permission has beeri obtained for a forward rate $(90$ days$).$ KRW$789=$ USD$100$ The $90-$day Eurodollar interest rate is $5\mathrm{.}125\%,$ while the $90-$day Korean won deposit rate $($there is no Euro$-$won rate$)$ is $4\mathrm{.}000\%.$ KAL can borrow in Korea at $6\mathrm{.}375\%,$ and can probabily borrow in the U$.$S$.$ dollar market at $10\mathrm{.}000\%.$

A three$-$month call option on dollars in the over$-$the$-$counter market, lor a strike price of KRW$782=$USD$100$ sells at a premium of $3\mathrm{.}2\%.$ payable at the lime the option is purchased A $90-$day put option on dollars, also at a strike price of KRW$7$B$2=$USD$1\mathrm{.}00,$ sells at a premium of $19\%($assuming a $12\%$ volatility$)$ KAE's foreign exchange advisory service forecasts the spol fate in three months to be KRW$785=$ USD$100.$ Assume a $360-$day financial year: Compare alternate wrys beicw that KAL might deal with its foreign, exchange exposure.

a$.$ How much in Kotean 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 KRW$785=$ USD$1\mathrm{.}00?$

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 KRW$782=$ USD$100?$

e$.$ How should KAL plan to make the payment to Boeing if KAL's goal is to maximize the amourt of won cash left in the bank at the end of the three$-$month period?