3,6) Hedging a co 4 (LO 3, 6) Hedging a commitment with an option. Wellington Manufactur- ufactures industrial ovens used primarily in the process of coating or painting metals. ovens are sold throughout the world, and units are manufactured to customers' specifica- n June 15, the company committed to sell two ovens to a major transnational custo- gman S 20)9 The tions. O mer. er. One of the ovens has a selling price of $549,600 and is to be paid for with foreign s to be paid for with for- currency A (FCA). Th e other unit has a selling price of $297,975 and i ign currency B (FCB). Both units were shipped, FOB shipping point, on September 15, and payment is due within 30 days of shipment. In order to hedge against exchange rate risks, Well ngton acquired rwo put options on June 15 with notional amounts equal to the respective for eigu currency selling prices. The options expire on October 15, and customer remittances are also received on Ocrober 15. Relevant information concerning the options and exchange rares is as shown: Fair Value of Option FCA option (strike price $1.200 FCB option (strike price $0.700) June 15 $5,000 $8,500 September 15 $21,000 4,300 October 15 Spot Rates $1.200 $0.685 FCB. . $1.160 $0.692 $1.170 $0.720 effectiveness. determine the gain or loss to be recognized on each of the commitments. The