Use the following information to answer the question(s) below.
On November 2, 2014, Bellamy Corporation sells product to their Danish customer. At the same time, Bellamy signed a forward contract to sell 200,000 Danish krone in ninety days to hedge the account receivable at $0.1905, the 90-day forward rate. The receivable is expected to be collected in ninety days. Assume the forward contract will be settled net and this is a fair value hedge. The related exchange rates are shown below:
-Assuming a present value factor of 1 for simplicity,what is the fair value of this forward contract on January 31?
A) $-0-
B) $ 60 asset
C) $160 liability
D) $200 liability
Correct Answer:
Verified
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