On January 31, 2020 Fred has a 50,000 foreign currency denominated Accounts Payable due in 1 month. This payable is not hedged. The following exchange rates were in effect. January 31, 2020 : spot rate 5 US = 1 FC January 31, 2020: one month forward rate 2.5 US = 1FC February 28, 2020 spot rate 4 US = 1 FC February 28, 2020 one month forward rate 3 US = 1FC How much is the FX gain or loss on February 28, 2020.
On January 31, 2020 Fred has a 50,000 foreign currency denominated Accounts Payable due in 1 month. This payable is not hedged. The following exchange rates were in effect. January 31, 2020 : spot rate 5 US = 1 FC January 31, 2020: one month forward rate 2.5 US = 1FC February 28, 2020 spot rate 4 US = 1 FC February 28, 2020 one month forward rate 3 US = 1FC How much is the FX gain or loss on February 28, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 31, 2020 Fred has a 50,000 foreign currency denominated Accounts Payable due in 1 month. This payable is not hedged. The following exchange rates were in effect.
January 31, 2020 : spot rate 5 US = 1 FC
January 31, 2020: one month forward rate 2.5 US = 1FC
February 28, 2020 spot rate 4 US = 1 FC
February 28, 2020 one month forward rate 3 US = 1FC
How much is the FX gain or loss on February 28, 2020.
|
a. |
FX gain $10,000 |
|
|
b. |
FX gain $50,000 |
|
|
c. |
FX loss $2,500 |
|
|
d. |
FX loss $50,000 |
|
|
e. |
FX gain $2,500 |
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