IBM Enters into a Forward Contract to Purchase 200,000 Euros

question 60

Multiple Choice

IBM enters into a forward contract to purchase 200,000 euros at a rate of 1.50 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)$200,000
• B)$225,000
• C)$400,000
• D)$300,000
• E)$250,000

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Definitions:

Phloem

The vascular tissue in plants that conducts sugars and other metabolic products downward from the leaves.

Xylem

A type of vascular tissue in plants that transports water and dissolved minerals from the roots to the rest of the plant.

Alpha-Galacturonic Acid

A component of pectin, a polysaccharide found in the cell walls of plants, involved in maintaining cell structure and rigidity.

Glucagon

A hormone produced by the pancreas that promotes the increase of blood glucose levels by stimulating glycogen breakdown in the liver.