Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: Assuming a forward contract was entered into, the foreign currency was originally sold in the foreign currency market on December 16, 2021 at a:
A) Forward contract discount $1,400.
B) Forward contract premium $1,400.
C) Forward contract discount $600.
D) Forward discount premium $600.
E) There is no premium or discount because the fair value of the contract is zero.

Question

Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied:  Assuming a forward contract was entered into, the foreign currency was originally sold in the foreign currency market on December 16, 2021 at a:
A) Forward contract discount $1,400. 
B) Forward contract premium $1,400. 
C) Forward contract discount $600. 
D) Forward discount premium $600. 
E) There is no premium or discount because the fair value of the contract is zero.

Quizplus · Accepted Answer

The Answer is B