IBM Enters into a Forward Contract to Purchase 100,000 Euros

question 87

Multiple Choice

IBM enters into a forward contract to purchase 100,000 euros at a rate of 1.60 USD/EUR one year from today.If the spot exchange rate is 2 USD/EUR one year later,what is the dollar amount that IBM must pay to receive the euros?

• A)$100,000
• B)$160,000
• C)$200,000
• D)$300,000
• E)$240,000

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Definitions:

Petty Cash Fund

A small amount of cash kept on hand for minor, immediate expenses.

Cash Controls

Financial procedures and policies that are implemented to manage and monitor cash transactions, to prevent theft, fraud, or errors.

FASB Controls

Guidelines and standards established by the Financial Accounting Standards Board (FASB) to govern the financial reporting and accounting practices of companies in the United States.

GAAP Controls

Financial and accounting guidelines and standards designed to ensure accurate and consistent financial reporting and accounting practices.