Business, 21.12.2019 03:31 DaFuzzyDude

Caterpillar (u. s.) just purchased a korean company that produces plastic nuts and bolts for heavy equipment. the purchase price was won7,030 million. won1,000 mllion has already been paid, and the remaining won6,030 million is due in six months. the current spot rate is won1200/$, and the 6-month forward rate is won 1260$.six month korean rate: 16.00% p. a.six month us interest rate : 4.00% p. a.six month call option on korean : 3.00% premium won at w1200/$ six-month put option on korean : 2.4% premiumwon at w 1200/$caterpillar can invest at the rates given in the pre ceding table, or borrow at 2% per annum above those rates. cat's weighted average cost of capital is 10%. compare alternate ways that caterpillar might deal with its foreign exchange exposure. what do you recommend and why?

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