Multiple Choice
On November 2, 2013, Glasser Company purchased a machine for 100,000 Swiss francs (CHF) with payment requirement on March 30, 2014. To eliminate the risk of foreign exchange losses on this payable, Glasser entered into a forward exchange contract on November 3, 2013 to receive CHF 100,000 at a forward rate of CHF1 = $2 on March 30, 2014. The spot rate was CHF1 = $1.95 on November 2, 2013 and CHF1 = $1.97 on December 1, 2013. What is the amount of the premium or discount on the forward exchange contract?
A) A discount of $3,000.
B) A premium of $5,000.
C) A discount of $5,000.
D) A premium of $3,000.
Correct Answer:
Verified
Correct Answer:
Verified
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