KAL and Boeing. Korean Airlines $($KAL$)$ has just signed a contract with Boeing to purchase two new $747-400$ s for a total of USD$72,000,000,$ with payment in two

equal tranches. The first tranche of USD$36,000,000$ has just been paid. The next USD$36,000,000$ is due three months from today. KAL currently has excess cash of

$29,000,000,000$ 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$795=$ USD$1\mathrm{.}00,$ and permission has been obtained for a forward rate $(90$ days$),$ KRW$789=$ USD$1\mathrm{.}00.$ The $90-$day Eurodollar

interest rate is $5\mathrm{.}375\%,$ while the $90-$day Korean won deposit rate $($there is no Euro$-$won rate$)$ is $4\mathrm{.}250\%.$ KAL can borrow in Korea at $6\mathrm{.}625\%,$ and can probably

borrow in the U$.$S$.$ dollar market at $9\mathrm{.}875\%.$

A three$-$month call option on dollars in the over$-$the$-$counter market, for a strike price of KRW$784=$ USD$1\mathrm{.}00$ sells at a premium of $2\mathrm{.}9\%,$ payable at the time

the option is purchased. A $90-$day put option on dollars, also at a strike price of KRW$784=$ USD$1\mathrm{.}00,$ sells at a premium of $1\mathrm{.}6\%($assuming a $12\%$ volatility$).$ KAL's

foreign exchange advisory service forecasts the spot rate in three months to be KRW$786=$USD$1\mathrm{.}00.$ 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 KRW$786=$ 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?

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 KRW$786=$ USD$1\mathrm{.}00?$

KRW $($Round to the nearest whole number.$)$