Amazing Corporation, a U The Discount Factor Corresponding to the Company's Incremental Borrowing Rate

question 38

Multiple Choice

Amazing Corporation, a U.S. enterprise, sold product to a customer in Wales on October 1, 20x1 for £100,000 with payment required on April 1, 20x2. Relevant exchange rates are:
$\begin{array}{lll} & \text { Spot rate } & \text { Forward rate (to } 4 / 1 / \mathrm{x} 2) \\\text { October } 1,20 \times 1 & \$ 1.87 & \$ 1.85 \\\text { December } 31,20 \times 1 & \$ 1.85 & \$ 1.84 \\\text { April 1.20x2 } & \$ 1.90 &\end{array}$
The discount factor corresponding to the company's incremental borrowing rate for 6 months is 0.95.
-Assuming that Amazing Corporation does not hedge this transaction, what is the amount of exchange gain or loss that it should show on its December 31, 20x1 income statement?

• A)Loss $1,000
• B)Loss $2,000
• C)Gain $1,000
• D)Gain $1,900

---

Definitions:

Bruce Tuckman

An American psychological researcher known for his "forming, storming, norming, performing" model of group development.

Group Development

The sequence of stages groups undergo from formation to termination, including forming, storming, norming, and performing.

Contributor Style

A personal approach or manner in which an individual adds value or contributes to a team or organization.

Team Diversity

The inclusion of individuals within a team who come from a wide range of backgrounds and possess various skills, experiences, and perspectives.