On December 1, Y1, AAA, a US based company, entered into a three months forward contract to purchase 1 million foreign currency FC, on March 1, Y2. The following US per FC exchange rates apply: Date Spot Rate Forward Rate December 1, Y1 $0.088 $0.084 December 31, Y1 $ 0.080 $0.074 March 1, Y2 $0.076 AAA borrowing rate is 12%. The present value factor for 2 months at an annual rate is 0.9803. How would AAA report the forward contract on its balance sheet on December 31, Y1? Justify your answer and show your calculations. 3 pts As a liability of 9,803. 1,000,000 x (0.084-0.074) = 10,000 x 0.9803 = 9803
On December 1, Y1, AAA, a US based company, entered into a three months forward contract to purchase 1 million foreign currency FC, on March 1, Y2. The following US per FC exchange rates apply:
Date Spot Rate Forward Rate
December 1, Y1 $0.088 $0.084
December 31, Y1 $ 0.080 $0.074
March 1, Y2 $0.076
AAA borrowing rate is 12%. The present value factor for 2 months at an annual rate is 0.9803.
How would AAA report the forward contract on its
As a liability of 9,803.
1,000,000 x (0.084-0.074) = 10,000 x 0.9803 = 9803
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