Stover Corporation, a U.S. based importer, makes a purchase of crystal glassware from a firm in Switzerland for 39,960 Swiss francs, or $24,000, at the spot rate of 1.665 Swiss francs per dollar. The terms of the purchase are net 90 days, and the U.S. firm wants to cover this trade payable with a forward market hedge to eliminate its exchange rate risk. Suppose the firm completes a forward hedge at the 90-day forward rate of 1.682 Swiss francs. If the spot rate in 90 days is actually 1.615 Swiss francs, how much in U.S. dollars will the U.S. firm have saved or lost by hedging its exchange rate exposure? Do not round the intermediate calculations and round the final answer to the nearest cent.
A. $1,212.29
B. $926.47
C. $985.60
D. $965.89
E. $916.61
Answer: C
You might also like to view...
What is the REA model? What does it mean for accountants?
AirCar LLC, a producer of consumer electronics, used gainsharing to compensate its employees. However, after a change in management, the company decides to replace gainsharing with a stock option plan. Which of the following statements is true of AirCar LLC?
A. It used to provide individual incentives, but now it provides organizational incentives. B. It used to provide individual incentives, but now it provides team incentives. C. It used to provide team incentives, but now it provides organizational incentives. D. It used to provide organizational incentives, but now it provides individual incentives.
To determine the balance in an account, always subtract credits from debits
Indicate whether the statement is true or false
Consider a chainsaw that fails five times in 100 hours of operation. The MTBF is ______.
a. 20 hours b. 30 hours c. 40 hours d. 15 hours