Gray Wolf. Gray Wolf, Ltd., a Canadian manufacturer of raincoats, does not selectively hedge its transaction exposure. Instead, if the date of the transaction is known with certainty, all foreign currency-denominated cash flows must utilize the following mandatory forward cover formula: Mandatory Forward Cover 0-90 days 91-180 days 180 days paying the points forward 75% 60% 50% Recieving the points forward 100% 90% 50% Gray Wolf expects to receive multiple payments in Danish kroner over the next year. DKr3,000,000 is due in 90 days, DKr2,000,000 is due in 180 days, and DKr1,000,000 is due in one year. Using the following spot and forward exchange rates, what would be the amount of forward cover required by company policy for each period?   Dkr = C $1.00 Spot rate 4.70 3-month forward rate 4.71 6-month forward rate 4.72 12-month forward rate 4.74

Please answer both subparts. 1. The following Information should be used for Questions 1 and 2. The treasurer of X wants to hedge an exposure to currency risk. X is a company whose domestic currency is the euro, and the company must make a payment of US $500 000 to a US supplier in 6 months' time. The following market rates are available: Exchange rates: $ per €1 Spot= 1.604 ± 0.002 6 months forward= 1.570 ± 0.004 6 month interest rates: Euro Borrowing= 4.8%. Euro Deposits= 4.4% US dollar Borrowing= 2.5%. US dollar Deposits= 2.0%. What would be the euro cost to X if he hedges through a forward contract? (a) Euro 326, 495 (b) Euro 319, 285 (c) Euro 313, 525 (d) Euro 333, 295 2. What would be the cost to X if he hedges through the money market? (a) USD 634, 631 (b) USD 631, 634 (c) Euro 316, 634 (d) Euro 316, 436

On November 1, 2020, Cheng Company (a U.S.-based company) forecasts the purchase of goods from a foreign supplier for 130,000 yuan. Cheng expects to receive the goods on April 30, 2021, and make immediate payment. On November 1, 2020, Cheng enters into a six-month forward contract to buy 130,000 yuan. The company properly designates the forward contract as a cash flow hedge of a forecasted foreign currency transaction. Forward points are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis over the life of the contract. The following U.S. dollar–Yuan exchange rates apply: Date Spot Rate Forward Rate (to April 30, 2021) November 1, 2020 $ 0.24 $ 0.225 December 31, 2020 0.23 0.200 April 30, 2021 0.21 N/A As expected, Cheng receives goods from the foreign supplier on April 30, 2021, and pays 130,000 yuan immediately. Cheng sells the imported goods in the local market in May 2021. Prepare all journal entries, including…

a) On January 1, 2022, Dymaxium Inc. a Canadian company, sold Alberta beef to a foreign company for FC$200,000, with payment due on March 1, 2008. ON the same date, Dymaxium entered into a forward contract with the bank to sell the foreign currency (FC) it will receive on March 1, 2022 at a rate of FC1=C$1.16. The forward contract was designed as a fair value hedge of the FC receivable.   On March 1, 2022, Dymaxium received the payment from the foreign company and settled the forward contract with the bank.   Spot exchange rates were as follows:   January 1, 2022 FC1 = C$1.18 March 1, 2022 FC1 = C$1.19   Required Prepare journal entries to record the above transactions 1

ABC Company has the Philippine peso as its functional currency. The entity expects to purchase goods from USA for $50,000 on March 31, 2023. Accordingly, the entity is exposed to a foreign currency risk. If the dollar increases before the purchase takes place, the entity will have to pay more pesos to obtain the $50,000 that it will have to pay for the goods. On October 1, 2022, the entity entered into a foreign currency forward contract with a bank speculator to purchased $50,000 in six months for a fixed amount of P2,050,000 or P41 to $1. This forward contract is designated as cash flow hedge of the entity’s exposure to increase in dollar exchange rate. On December 31, 2022, the exchange rate is P42 to $1 and on March 31, 2023, the exchange rate is P44 to $1. How much is the derivative asset (liability) on October 1, 2022?

AussieGold Ltd., an Australian gold mining company, sells gold to U.S. clients in USD. The company has not hedged its gold price or foreign exchange risk. The current spot exchange rate is AUD$ 1.00 = USD$ 0.677 and the current gold spot price is USD$ 1522 per ounce. Which of the following scenarios represents the best possible outcome for AussieGold Ltd. over the next year?     There is no change in the AUD/USD exchange rate and no change in the gold spot price.     AUD strengthens relative to the USD, and the gold spot price falls.     AUD weakens relative to the USD, and the gold spot price falls.     AUD strengthens relative to the USD, and the gold spot price rises.     AUD weakens relative to the USD, and the gold spot price rises.

Pencil corp uses the US dollar and its functional currency. The receivable is not hedged. At December 31, 2020 pencil has the following foreign currency balances: Account receivable (due in 3 months) FC 30,000 Inventory (at cost ) FC 20,000 Fixed assets FC 10,000 The following exchange rates were in effect December 31 spot rate !FC = .6 US December 31 three month forward rate: !FC = .5US Historic rate: !FC = .7US Average exchange rate(2020) !FC = .8US. What is the US dollar equivalent for the total of accounts receivable, inventory and fixed assets that will be reported by pencil on its december 31, 2020 balance sheet.

On November 1, 2023, Cheng Company (a U.S.-based company) forecasts the purchase of goods from a foreign supplier for 310,000 yuan. Cheng expects to receive the goods on April 30, 2024, and make immediate payment. On November 1, 2023, Cheng enters a six-month forward contract to buy 310,000 yuan. The company properly designates the forward contract as a cash flow hedge of a forecasted foreign currency transaction. Forward points excluded in assessing hedge effectiveness and amortized to net income using a straight-line method on a monthly basis over the life of the contract. The following U.S. dollar–Yuan exchange rates apply: Date Spot Rate Forward Rate (to April 30, 2024) November 1, 2023 $ 0.42 $ 0.405 December 31, 2023 0.41 0.380 April 30, 2024 0.39 N/A As expected, Cheng receives goods from the foreign supplier on April 30, 2024, and pays 310,000 yuan immediately. Cheng sells the imported goods in the local market in May 2024. Required: Prepare all journal entries,…

Brandt Corp. (a U.S.-based company) sold parts to a South Korean customer on December 1, 2020, with payment of 10 million South Korean won to be received on March 31, 2021. The following exchange rates apply:   Date Spot Rate Forward Rate(to March 31, 2021) December 1, 2020 $ 0.0035   $ 0.0034   December 31, 2020   0.0033     0.0032   March 31, 2021   0.0038     N/A         1. Assuming that Brandt did not hedge his foreign exchange risk, how much foreign exchange gain or loss should it report on its 2020 income statement with regard to this transaction?   a. 3000 gain b. 2000 loss c. 5000 gain d. 1000 loss     2. Assuming that Brandt entered into a forward contract to sell 10 million South Korean won on December 1, 2020, as a fair value hedge of a foreign currency receivable, what is the net impact on its net income in 2020 resulting from a fluctuation in the value of the won? Brandt amortizes forward points on a monthly basis using a straight-line method. Ignore…

Busco has a foreign-currency denominated payable, itcan hedge by buying the foreign currency payableforward. The company can expect to eliminate theexposure without incurring costs as long as the forwardexchange rate is an unbiased predictor of the future spotrate. Busco exported an A380 to a UK company, and wasbilled the sum of £ 12,000,000 payable in three months.Currently the spot rate is $1.40/£ and the three-monthforward rate is $1.36/£.The three-month money marketinterest rate is 12% per annum in US and 8% per annumin UK.So the management of Busco decided to managethis transaction exposure and use the money markethedge to deal with this pound account payable. 1)Conduct a cash flow analysis of the money market hedge. Answer:   Transaction Current cash flow (3-month) Cash flow at maturity  1 Borrow £   =£11,764,705.88     - £12,000,000 2 Buy $ spot with £   = $16, 470,588.24   - £11,764,705.88   0 3 Invest in US   - $16, 470,588.24…