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On December 1, 20X1, Sycamore Company acquired a 90-day speculative forward contract to sell €135,000 at a forward rate of €1= $0.48. The rates are as follows: Date December 1, 20X1 December 31, 20x1 March 1, 20X2 Spot Rate €1=$0.50 €1 0.49 €1= 0.47 Speculation Forward Rate for March 1 €1=$0.48 €1= 0.46 Required: a. Determine the effects of this speculation on 20X1 income before income taxes.

On December 1, 20X1, Sycamore Company acquired a 90-day speculative forward contract to sell €135,000 at a forward rate of €1= $0.48. The rates are as follows: Date December 1, 20X1 December 31, 20x1 March 1, 20X2 Spot Rate €1=$0.50 €1 0.49 €1= 0.47 Speculation Forward Rate for March 1 €1=$0.48 €1= 0.46 Required: a. Determine the effects of this speculation on 20X1 income before income taxes.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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On December 1, 20X1, Sycamore Company acquired a 90-day speculative forward contract to sell €135,000 at a forward rate of €1 = $0.48. The rates are as follows: Date December 1, 20x1 December 31, 20X1 March 1, 20X2 Speculation Spot Rate €1= $0.50 €1= 0.49 €1= 0.47 Required: a. Determine the effects of this speculation on 20X1 income before income taxes. Forward Rate for March 1 €1= $0.48 €1 0.46 Speculation b. Determine the effects of this speculation on 20X2 income before income taxes.
Transcribed Image Text:On December 1, 20X1, Sycamore Company acquired a 90-day speculative forward contract to sell €135,000 at a forward rate of €1 = $0.48. The rates are as follows: Date December 1, 20x1 December 31, 20X1 March 1, 20X2 Speculation Spot Rate €1= $0.50 €1= 0.49 €1= 0.47 Required: a. Determine the effects of this speculation on 20X1 income before income taxes. Forward Rate for March 1 €1= $0.48 €1 0.46 Speculation b. Determine the effects of this speculation on 20X2 income before income taxes.
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