On May 1, 2014, Listing Corporation receives inventory items from their Bulgarian supplier. At the same time, Listing signed a forward contract to purchase 75,000 Bulgarian lev in sixty days to hedge the inventory purchase at $0.738, the 60-day forward rate. Payment for the inventory will be due in sixty days in Bulgarian lev. Assume the forward contract will be settled net and this qualifies as 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 May 31?

Question

On May 1, 2014, Listing Corporation receives inventory items from their Bulgarian supplier. At the same time, Listing signed a forward contract to purchase 75,000 Bulgarian lev in sixty days to hedge the inventory purchase at $0.738, the 60-day forward rate. Payment for the inventory will be due in sixty days in Bulgarian lev. Assume the forward contract will be settled net and this qualifies as 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 May 31?

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The Answer of On May 1, 2014, Listing Corporation receives inventory items from their Bulgarian supplier. At the same time, Listing signed a forward contract to purchase 75,000 Bulgarian lev in sixty days to hedge the inventory purchase at $0.738, the 60-day forward rate. Payment for the inventory will be due in sixty days in Bulgarian lev. Assume the forward contract will be settled net and this qualifies as 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 May 31?

On May 1, 2014, Listing Corporation Receives Inventory Items from Their