Car Corp (A U

question 5

Multiple Choice

Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2011, with payment of 10 million Korean won to be received on January 15, 2012. The following exchange rates applied:

Assuming a forward contract was entered into, what would be the net impact on Car Corp.'s 2011 income statement related to this transaction? Assume an annual interest rate of 12% and a fair value hedge. The present value for one month at 12% is .9901.

• A) $700 (gain).
• B) $700 (loss).
• C) $300 (gain).
• D) $300 (loss).
• E) $295 (gain).

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Definitions:

Minimum Effort

Minimum effort refers to the least amount of work or exertion required to complete a task or achieve a goal.

Work Done

In physics, it is the measure of energy transfer that occurs when an object is moved over a distance by an external force at least partly in the direction of the displacement.

Autocratic Style

A management style characterized by individual control over all decisions and little input from group members, often leading to a clear, authoritative command structure.

Command-and-control

A traditional management style that relies on hierarchical structure, strict discipline, and clear orders.