A Company Sells $1,000,000 Face Value Interest Rate Futures (120-Day

Multiple Choice

A company sells $1,000,000 face value interest rate futures (120-day Treasury bills) at 91, as an effective hedge of its firm commitment to roll over its variable rate debt in 120 days. The interest rate futures increase in value to 92.5. How is this reported by the company?

A) Gain on the interest rate futures, reported in income
B) Loss on the interest rate futures, reported in other comprehensive income
C) Loss on firm commitment to roll over debt, reported in other comprehensive income
D) Gain on firm commitment to roll over debt, reported in income