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Najafi Company, U . S . - based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts for heavy
Najafi Company, USbased manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts for heavy equipment. The purchase price was KRW which is due in six months. The current spot rate is KRWUSD and themonth forward rate is KRWUSD Themonth Korean won interest rate is per annum, themonth US dollar rate is per annum. Najafi can invest at these interest rates, or borrow at per annum above those rates. Amonth call option on won with a KRWUSD strike rate has a premium while themonth put option at the same strike rate has a premium. Najafi's weighted average cost of capital is How much in US dollars will Najafi pay in months if Najafi enters into an option hedge and ends up exercising the option? Round to the nearest whole number.
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