How does a company determine the fair value of a foreign currency forward contract? How does it determine the fair value of an option?
Answer to relevant QuestionsWhat are the differences in accounting for a forward contract used as (a) a cash flow hedge and (b) a fair value hedge of a foreign currency denominated asset or liability?How does a foreign currency option differ from a foreign currency forward contract?On March 1, Pimlico Corporation (a U.S.-based company) expects to order merchandise from a supplier in Sweden in three months. On March 1, when the spot rate is $0.10 per Swedish krona, Pimlico enters into a forward contract ...Acme Corporation (a U.S. company located in Sarasota, Florida) has the following import/export transactions in 2011:March 1 Bought inventory costing 50,000 pesos on credit.May 1 Sold 60 percent of the inventory for 45,000 ...Eximco Corporation (based in Champaign, Illinois) has a number of transactions with companies in the country of Mongagua, where the currency is the mong. On November 30, 2011, Eximco sold equipment at a price of 500,000 ...
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