On Dec. 5, 2018, a US firm purchased inventory for 400,000 Pounds for which the payment will be made on March 20, 2018.
The firm’s fiscal year ends on December 31. Following are the spot rates and forward rates for Pounds:
Dates	Spot Rate	Forward Rate
Dec. 5, 2018	$1.040	$1.042
Dec. 31, 2018	$1.045	$1.049
Mar 20 2019	$1.060	$1.060
On Dec. 5, 2018 the US firm entered into a forward contract to buy 400,000 Pounds on March 20, 2019 for $1.042.

1- On Mar 20, to carry out the forward contract, the US firm will

2- What will be the receivable on the forward contract on the settlement date?

3- For the forward contract, the gain or loss recorded on Mar 20 will be

4- For the forward contract, the gain or loss recorded on Dec 31 will be

Answer rating: 100% (QA)

Step 1 Gain from forward contract Price at Mar 20 2019 Price at Dec 5 2018 Contract size 1061042 400... View the full answer