On November 1, 20x1 Zamfir Company, a U.S. corporation, purchased minerals from a Russian company for 2,000,000

Question:

On November 1, 20x1 Zamfir Company, a U.S. corporation, purchased minerals from a Russian company for 2,000,000 rubles, payable in 3 months. The relevant exchange rates between the U.S. and Russian currencies are given:

Spot Rate Forward Rate (at February 1, 20x2) November 1, 20x1 S0.348 S0.348 S0.359 S0.352 December 31, 20x1 February 1,

The company's incremental borrowing rate provides a discount rate of 0.975 for three months.
Assume that on November 1, 20x1 Zamfir Company enters a forward contract to buy 2,000,000 rubles on February 1, 20x2. What is the fair value of the forward contract on December 31, 20x1?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...