On November 1,2014,Balloon Company Sold Some Limited Edition Art Prints

question 44

Multiple Choice

On November 1,2014,Balloon Company sold some limited edition art prints to Sitake Company for ¥47,850,000 to be paid on January 1,2015.The current exchange rate on November 1,2014,was ¥110=$1,so the total payment at the current exchange rate would be equal to $435,000.Balloon entered into a forward contract with a large bank to guarantee the number of dollars to be received.According to the terms of the contract,if ¥47,850,000 is worth less than $435,000,the bank will pay Balloon the difference in cash.Likewise,if ¥47,850,000 is worth more than $435,000,Balloon must pay the bank the difference in cash.Assuming the exchange rate on December 31,2014 is ¥115=$1,what amount will Balloon disclose as the fair value of the forward contract on December 31,2014 (answers rounded to the nearest dollar) ?

• A) $0
• B) $18,913
• C) $20,714
• D) $416,087

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.