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

Question

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

Quizplus · Accepted Answer

The Answer of 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

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