Tan, a money changer speculate in foreign currency as his business. On October 1, 2014, Tan bought a 180-day forward contract to purchase 5,000 FC at forward rate of FC1 = 56.50 when the spot rate was 56. Other exchange rate follows: Spot rate Forward rate December 31, 2014 56.30 56.60 March 31, 2015 56.32 The forex gain or (loss) recognized by Tan from this forward contract is: A. (10,000) B. (900) C. 500 D. 1,500

Tan, a money changer speculate in foreign currency as his business. On October 1, 2014, Tan bought a 180-day forward contract to purchase 5,000 FC at forward rate of FC1 = 56.50 when the spot rate was 56. Other exchange rate follows: Spot rate Forward rate December 31, 2014 56.30 56.60 March 31, 2015 56.32 The forex gain or (loss) recognized by Tan from this forward contract is: A. (10,000) B. (900) C. 500 D. 1,500

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 1ST

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Maloney Corporation has decided to speculate on the foreign exchange market, and has entered into a 6-month forward contract to sell 250,000 Mexican pesos. When the forward contract was acquired on October 1, 2012, the spot rate for the peso was $0.1601 and the 6-month future was $0.1639. On December 31, 2012, the spot rate was $0.1616 and the future rate was $0.1607. On April 1, 2013, the spot rate was $0.1650. Spot Rate Forward Rate 10/1/12 0.1601 0.1639 12/31/12 0.1616 0.1607 4/1/13 0.1650 Prepare the necessary journal entries to record the forward contract Journal…
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