IBM Enters into a Forward Contract to Purchase 100 000

question 10

Multiple Choice

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

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