Car Corp (A U -Assuming a Forward Contract Was Entered Into, What Would Be

Multiple Choice

Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2011, with payment of 10 million Korean won to be received on January 15, 2012. The following exchange rates applied: $\begin{array}{lrr}& & \text { Forward } \\ & \text { Sot } & \text { Rate } \\\text { Date } & \text { Rate } & \text { to Jan.15 }\\\text { December 16, 2011 } & \$ .00092 & \$ .00098 \\\text { December 31,2011 } & .00090 & .00093 \\\text { January } 15,2012 & .00095 & .00095\end{array}$
-Assuming a forward contract was entered into, what would be the net impact on Car Corp.'s 2011 income statement related to this transaction? Assume an annual interest rate of 12% and a fair value hedge. The present value for one month at 12% is .9901.

A) $700 (gain) .
B) $700 (loss) .
C) $300 (gain) .
D) $300 (loss) .
E) $295 (gain) .