What was the net impact on Mattie's 2018 income as a result of this fair value hedge of a firm commitment?
A) $1,800.00 decrease.
B) $1,760.60 decrease.
C) $2,240.40 decrease.
D) $1,660.40 increase.
E) $2,240.60 increase.

Question

Quizplus · Accepted Answer

The net impact on Mattie's 2018 income as a result of this fair value hedge of a firm commitment is the difference between the fair value of the hedge at the beginning of the year and the fair value of the hedge at the end of the year. The fair value of the hedge at the beginning of the year was $17,507.50 ($35,000.00 - $17,492.50), and the fair value of the hedge at the end of the year was $15,746.90 ($34,989.50 - $19,242.60). The net impact on income is the difference between these two amounts, which is $1,760.60 ($17,507.50 - $15,746.90). Therefore, the best choice is B.

What Was the Net Impact on Mattie's 2018 Income as a Result