On November 2,20X9,Henry Company Purchased a Machine for 100,000 Swiss

question 4

Multiple Choice

On November 2,20X9,Henry Company purchased a machine for 100,000 Swiss francs (CHF) with payment requirement on March 30,20X10.To eliminate the risk of foreign exchange losses on this payable,Henry entered into a forward exchange contract on November 3,20X9 to receive CHF 100,000 at a forward rate of CHF1 = $2 on March 30,20X10.The spot rate was CHF1 = $1.95 on November 2,20X9 and CHF1 = $1.97 on December 1,20X9.What is the amount of the premium or discount on the forward exchange contract on December 1,20X9?

• A)A premium of $3,000
• B)A discount of $3,000
• C)A premium of $5,000
• D)A discount of $5,000

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