Time value: Time value is the difference between the spot and forward or change in contract value and change in intrinsic value. The contract has no intrinsic value since the spot rate on July 31 is greater than the spot rate on June 30 . Hence, the contact value should be traceable to time value. To calculate: The change in value of the inventories and gain/loss on future contracts for the fair value hedges.

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Chapter 9.M, Problem 2E

To determine

Time value:

Time value is the difference between the spot and forward or change in contract value and change in intrinsic value.

The contract has no intrinsic value since the spot rate on July 31 is greater than the spot rate on June 30 . Hence, the contact value should be traceable to time value.

To calculate:

The change in value of the inventories and gain/loss on future contracts for the fair value hedges.

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