On May 1, 2021, Mosby Company Received an Order to Sell

question 79

Multiple Choice

On May 1, 2021, Mosby Company received an order to sell a machine to a customer in Canada at a price of 2,000,000 Mexican pesos. The machine was shipped and payment was received on March 1, 2022. On May 1, 2021, Mosby purchased a put option giving it the right to sell 2,000,000 pesos on March 1, 2022 at a price of $190,000. Mosby properly designates the option as a fair value hedge of the peso firm commitment. The option cost $3,000 and had a fair value of $3,200 on December 31, 2021. The following spot exchange rates apply: Mosby's incremental borrowing rate is 12%, and the present value factor for two months at a 12% annual rate is 0.9803.What was the overall result of having entered into this hedge of exposure to foreign exchange risk?

• A)$0.
• B)$9,000 net loss on the option.
• C)$9,000 net gain on the option.
• D)$2,000 net gain on the option.
• E)$2,000 net loss.

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Definitions:

Sociocultural Conditions

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Binge Eating Disorders

A serious eating disorder characterized by recurrent episodes of eating large amounts of food, often quickly and to the point of discomfort, with feelings of loss of control during the episodes.

Anorexia Nervosa

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Bulimia Nervosa

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