Use the Following Information to Answer the Question(s) Below

question 6

Multiple Choice

Use the following information to answer the question(s) below.

On November 2, 2014, Bellamy Corporation sells product to their Danish customer. At the same time, Bellamy signed a forward contract to sell 200,000 Danish krone in ninety days to hedge the account receivable at $0.1905, the 90-day forward rate. The receivable is expected to be collected in ninety days. Assume the forward contract will be settled net and this is a fair value hedge. The related exchange rates are shown below:

-Assuming a present value factor of 1 for simplicity,what is the fair value of this forward contract on January 31?

• A)$-0-
• B)$ 60 asset
• C)$160 liability
• D)$200 liability

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Definitions:

Annually Balanced Budget

A financial statement showing that projected government revenues equal expected expenditures on an annual basis.

Destabilize

To cause a system, situation, or environment to become unstable or out of balance.

Economy

The large set of interrelated production, consumption, and exchange activities that aid in determining how scarce resources are allocated.

Full-Employment

Full-employment refers to the level of employment rates where there is no cyclical or deficient-demand unemployment, essentially meaning that everyone who wants to work and is able to work can find employment at the current wage rates.