On December 1,20X8,Hedge Company Entered into a 60-Day Speculative Forward

question 46

Multiple Choice

On December 1,20X8,Hedge Company entered into a 60-day speculative forward contract to sell 200,000 British pounds (£) at a forward rate of £1 = $1.78.On the same day it purchased a 60-day speculative forward contract to buy 100,000 euros (€) at a forward rate of €1 = $1.42.
The rates are as follows:
Hedge had no other speculation transactions in 20X8 and 20X9.Ignore taxes.
-Based on the preceding information,what is the overall effect of speculation on 20X9 net income?

• A)$1,000 loss
• B)$6,000 gain
• C)$3,000 loss
• D)$8,000 gain

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