On December 31, 2020, Pepper Company paid 3,000 to purchase a 90-day call option for 500,000 Thailand Baht. The option's purpose is to protect an exposed liability of 500,000 Baht relating to a purchase of merchandise received on December 1, 2020 and to be paid on March 1, 2021. Relevant rates and market values at different dates are as follows:

                                               12/1/20           12/31/20         3/1/21

Spot rate                                 1.20                1.28                1.27

Strike price                              1.20                1.20                1.20

Fair value of call option           3,000              42,000            35,000

 

I. The December 31, 2020 accounts payable amounted to?


II. The December 31, 2020 foreign currency contract value-option is?


III. The December 31, 2020 net foreign exchange gain or loss is?


IV. The March 1, 2021 expiration date foreign exchange net gain or loss is?


V. The March 1, 2021 expiration date, the foreign currency contract value-option is?

VI. Calculate the options time value at December 1, 2020


VII. Calculate the option's intrinsic value at December 31, 2020.

VIII. Calculate the option's time value and intrinsic value at March 1, 2021.

Answer rating: 100% (QA)

I The December 31 ... View the full answer