Assume IBM Enters into a Forward Contract to Purchase 100,000

question 1

Multiple Choice

Assume 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) $100,000
• B) $160,000
• C) $200,000
• D) $300,000