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timofeeve [1]
3 years ago
9

1. A U.S. company anticipates that it will sell merchandise for €100,000 at the end of August and receive payment for it at the

end of October. On May 1, when the spot rate is $1.20 and the forward rate for delivery on October 31 is $1.21, the company enters a forward contract to sell €100,000 on October 31. The forward contract qualifies as a cash flow hedge of the forecasted sale. The company sells the merchandise on August 30, when the spot rate is $1.232 and the forward rate for October 31 delivery is $1.23 and receives payment of €100,000 and closes the forward contract on October 31, when the spot rate is $1.24. The company has a December 31 year-end. What is the net exchange gain/loss for the year related to this transaction? A. $200 net gain B. $1,800 net loss C. $200 net loss D. $-0-
Business
1 answer:
mamaluj [8]3 years ago
6 0

Answer:

C. $200 net loss

Explanation:

The net loss or gain is calculated on hedging to determine whether the hedge has been beneficial for the company or not. Hedging is a process to transfer exchange rate movement risk. This is usually suitable for the companies who have receipts or payments in foreign currencies.

The hedging gain loss can be calculated as:

Forward rate at the time of contract - spot rate today

$1.21 - 1.232 = 0.0232

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Answer:

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An increment in the price level causes the money demand curve to shift to the right , while a decrement in the price level causes the money demand curve to shift to the left.

As the price level decreases, the value of money increases, so people want to hold less of it.

Therefore, when the money market is drawn with the value of money on the vertical axis, the price level increases, money demand shifts right or money supply shifts left.

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Explanation:

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b. planning, organizing, leading, and controlling

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