Woolsey Corporation, a U.S. company, expects to sell goods to a British customer at a price of 250,000 pounds, with delivery and payment to be made on October 24, 2021. On July 24, 2021, Woolsey purchased a three-month put option for 250,000 British pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction expected to be completed in late October, 2021. The following exchange rates apply: Option strike price Option cost July 24 spot rate October 24 spot rate October 24 option premium What amount will Woolsey record for the forecasted sale on July 24? Multiple Choice O O $0. $4,000. $ 2.17 $4,000 $ 2.17 $2.13 $ 0.04 $5,000.

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Woolsey Corporation, a U.S. company, expects to sell goods to a British customer at a price of 250,000 pounds, with delivery and payment to be made
on October 24, 2021. On July 24, 2021, Woolsey purchased a three-month put option for 250,000 British pounds and designated this option as a cash
flow hedge of a forecasted foreign currency transaction expected to be completed in late October, 2021. The following exchange rates apply:
Option strike price
Option cost
July 24 spot rate
October 24 spot rate
October 24 option
premium
What amount will Woolsey record for the forecasted sale on July 24?
Multiple Choice
O
O
$0.
$4,000.
$ 2.17
$4,000
$ 2.17
$ 2.13
$ 0.04
$5,000.
Transcribed Image Text:Woolsey Corporation, a U.S. company, expects to sell goods to a British customer at a price of 250,000 pounds, with delivery and payment to be made on October 24, 2021. On July 24, 2021, Woolsey purchased a three-month put option for 250,000 British pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction expected to be completed in late October, 2021. The following exchange rates apply: Option strike price Option cost July 24 spot rate October 24 spot rate October 24 option premium What amount will Woolsey record for the forecasted sale on July 24? Multiple Choice O O $0. $4,000. $ 2.17 $4,000 $ 2.17 $ 2.13 $ 0.04 $5,000.
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