Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2011, with payment of 10 million Korean won to be received on January 15, 2012. The following exchange rates applied: $\begin{array}{lrr}& & \text { Forward } \
& \text { Sot } & \text { Rate } \
\text { Date } & \text { Rate } & \text { to Jan.15 }\
\text { December 16, 2011 } & \$ .00092 & \$ .00098 \
\text { December 31,2011 } & .00090 & .00093 \
\text { January } 15,2012 & .00095 & .00095
\end{array}$
-Assuming a forward contract was entered into, the foreign currency was originally sold in the foreign currency market on December 16, 2011 at a

Question

Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2011, with payment of 10 million Korean won to be received on January 15, 2012. The following exchange rates applied: $\begin{array}{lrr}& & \text { Forward } \
 & \text { Sot } & \text { Rate } \
\text { Date } & \text { Rate } & \text { to Jan.15 }\
\text { December 16, 2011 } & \$ .00092 & \$ .00098 \
\text { December 31,2011 } & .00090 & .00093 \
\text { January } 15,2012 & .00095 & .00095
\end{array}$
-Assuming a forward contract was entered into, the foreign currency was originally sold in the foreign currency market on December 16, 2011 at a

Quizplus · Accepted Answer

The forward rate on December 16, 2011, was $0.00098, which is higher than the spot rate of $0.00092, indicating a forward contract premium. The premium is calculated as (0.00098 - 0.00092) * 10,000,000 = $600.

Car Corp (A U -Assuming a Forward Contract Was Entered Into, the Foreign Currency