On March 1, 2013, Chacin Ltd Assume That the Transaction Qualifies as a Hedge

Multiple Choice

On March 1, 2013, Chacin Ltd. issued a purchase order to No Worries (New Zealand) Inc. to acquire equipment for $400,000 New Zealand dollars. On the same day, Chacin entered into a forward contract to receive $400,000 New Zealand dollars on July 31, 2013. The equipment was delivered on June 1, 2013 and payment was made July 31, 2013. Chacin has an April 30 year-end. The following information has been provided: $$\begin{array} { | l | c | c | } \hline \text { Date } & \text { Spot Rate } & \frac { \text { Forward rate to July 31 } } { 2013 } \\\hline \text { March } 1,2013 & .7686 & .7810 \\\hline \text { Apri1 30,2013 } & .7702 & .7818 \\\hline \text { June 1,2013 } & .7940 & .7985 \\\hline \text { July 31,2013 } & .7995 & \text { n/a } \\\hline\end{array}$$ Assume that the transaction qualifies as a hedge. What is the cost of the hedge?

A) $4,960
B) $2,200
C) $4,640
D) $6,680