The Forward Exchange Rate Quoted for the Remaining Term of a Forward

question 35

Multiple Choice

The forward exchange rate quoted for the remaining term of a forward contract is used to account for the contract when the forward contract:

• A) extends beyond one year or the current operating cycle.
• B) is a hedge of an identifiable foreign currency commitment.
• C) is a hedge of an exposed net liability position.
• D) was acquired to speculate in foreign currency.

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Definitions:

Substantial Performance

A contract law principle that allows for partial enforcement of a contract when most, but not all, aspects of the contract have been fulfilled.

Impossibility

A legal defense where a party claims it was not possible to fulfill the terms of a contract due to unforeseen circumstances.

Commercial Impracticability

A legal doctrine that excuses a party from fulfilling a contract due to unforeseen and extreme difficulties or expenses.

Adequacy of Consideration

The sufficiency of value exchanged in a contract that must be present for the agreement to be legally binding.