Use the Following Information to Answer the Question(s) Below

question 40

Multiple Choice

Use the following information to answer the question(s) below.

On November 2, 2014, Bellamy Corporation sells product to their Danish customer. At the same time, Bellamy signed a forward contract to sell 200,000 Danish krone in ninety days to hedge the account receivable at $0.1905, the 90-day forward rate. The receivable is expected to be collected in ninety days. Assume the forward contract will be settled net and this is a fair value hedge. The related exchange rates are shown below:

-Assuming a present value factor of 1 for simplicity,what is the fair value of this forward contract on December 31?

• A)$160 asset
• B)$160 liability
• C)$140 asset
• D)$140 liability

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