On 6/1/X2, an American Firm Purchased a Inventory Costing 100,000

question 33

Multiple Choice

On 6/1/X2, an American firm purchased a inventory costing 100,000 Canadian Dollars from a Canadian firm to be paid for on 8/1/X2. Also on 6/1/X2, the American firm entered into a forward contract to purchase 100,000 Canadian dollars for delivery on 8/1/X2. The exchange rates were as follows: The American firm's fiscal year end is 6/30/X2. The changes in the value of the forward contract should be discounted at 8%. What is the value of the Forward Contract on 6/30/X2?

• A)$75,000
• B)$1,000
• C)$993
• D)$74,000

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