Advanced Accounting test bank graded A+

Advanced Accounting test bank graded A+ The foreign exchange rate for the immediate delivery of currencies exchanged is called the: A) forward rate. B) historical rate. C) spot rate. D) market rate. E) swap rate. - ANSWERSpot Rate On November 1 of the current year, Patriot Inc. purchased a container of electrical components from its supplier in Japan. Patriot agreed to pay 15,000,000 ¥ in 90 days. The exchange rate on November 1 was $1 = 120 ¥. Patriot decided to hedge the transaction and entered into a 90 day forward contract to purchase yen at a cost of $1 = 125 ¥. The 60 day forward rate that would take Patriot to the December 31 fiscal year end was $1 = 127.50 ¥. On December 31, the spot rate was $1 = 118 ¥, and the 30-day forward rate was $1 = 122 ¥. What is the balance in the forward contract account on November 1 of the current year? (For purposes of this exercise, use a present value factor of 1.) A) $0 B) $5,000 debit C) $5,000 credit D) $2,353 debit E) $7,353 credit - ANSWERa) $0 The value of a forward contract on the day it is taken out is always $0. On November 1 of the current year, Patriot Inc. purchased a container of electrical components from its supplier in Japan. Patriot agreed to pay 15,000,000 ¥ in 90 days. The exchange rate on November 1 was $1 = 120 ¥. Patriot decided to hedge the transaction and entered into a 90 day forward contract to purchase yen at a cost of $1 = 125 ¥. The 60 day forward rate that would take Patriot to the December 31 fiscal year end was $1 = 127.50 ¥. On December 31, the spot rate was $1 = 118 ¥, and the 30-day forward rate was $1 = 122 ¥. What is the balance in the forward contract account on December 31 of the current year? (For purposes of this exercise, use a present value factor of 1.) A) $7,119 debit B) $7,119 credit C) $2,951 debit D) $2,951 credit E) $120,000 debit - ANSWERC) $2,951 Cred