Consider the following information. 1. On September 1, 2021, a US firm contracts to buy equipment with an asking price of £100,000 from a firm in the U.K. The firm will take delivery and will pay for the equipment on March 1, 2022. 2. On that same day, September 1, 2021, the US firm enters into a forward contract to buy £100,000 for US$1.60/£ on March 1, 2022. 3. Spot rates and forward rates were quoted as follows: Spot Rate Forward Rate September 1, 2021 $1.59/£ $1.55/£ $1.57/£ $1.60/£ $1.53/£ September 30, 2021 March 1, 2022 4. On March1, 2022, the payment of £100,000 was made to the supplier of the equipment.

Consider the following information. 1. On September 1, 2021, a US firm contracts to buy equipment with an asking price of £100,000 from a firm in the U.K. The firm will take delivery and will pay for the equipment on March 1, 2022. 2. On that same day, September 1, 2021, the US firm enters into a forward contract to buy £100,000 for US$1.60/£ on March 1, 2022. 3. Spot rates and forward rates were quoted as follows: Spot Rate Forward Rate September 1, 2021 $1.59/£ $1.55/£ $1.57/£ $1.60/£ $1.53/£ September 30, 2021 March 1, 2022 4. On March1, 2022, the payment of £100,000 was made to the supplier of the equipment.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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