On March 1, 20X2, McBride Ltd -Assume That the Transaction Qualifies as a Cash-Flow Hedge

question 26

Multiple Choice

On March 1, 20X2, McBride Ltd. issued a purchase order to Tao Heavy Machines (Singapore) Inc. to acquire a drilling machine for $400,000 SGD. On the same day, McBride entered into a forward contract to receive $400,000 SGD on July 31, 20X2. The machine was delivered on June 1, 20X2, and payment was made July 31, 20X2. McBride has an April 30 year-end. The following information has been provided: $\begin{array}{|l|c|c|}\hline \text { Date } & \text { Spot Rate } & \text { Forward rate to July } 31,20 \times 2 \\\hline \text { March } 1,20 \times 2 & .7686 & .7810 \\\hline \text { April } 30,20 \times 2 & .7702 & .7818 \\\hline \text { June } 1,20 \times 2 & .7940 & .7985 \\\hline \text { July } 31,20 \times 2 & .7995 & \text { n/a }\\\hline \end{array}$

-Assume that the transaction qualifies as a cash-flow hedge. What is the cost of the hedge?

• A)$ 1,800
• B)$ 2,200
• C)$ 4,960
• D)$12,360

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Definitions:

Structuralism

A theoretical perspective in social sciences focusing on the underlying structures that determine the behavior of social phenomena rather than the phenomena themselves.

Functionalism

A sociological perspective that sees society as a complex system whose parts work together to promote solidarity and stability.

Existentialists

Existentialists are philosophers who emphasize individual freedom, choice, and personal responsibility, arguing that individuals are free to shape their own existence in an inherently meaningless world.

Sartre

Jean-Paul Sartre, a French philosopher, playwright, and critic, one of the leading figures in 20th century existentialism.