1. An asset manager anticipates the receipt of funds in 200days, which he will use to purchase a particular stock. The stock he had in mind is currently selling for P62.50 and will pay a P0.755 dividend in 50 days and another P0.75 dividend in 140 days. The risk free rate is 4.2%. The manager decides to commit to a future purchase of stock by going long a forward contract on the stock.
   REQUIRED:
   At what price would the manager commit to purchase the stock in 200 days through a forward contract?          (5 marks)
   Suppose the manager enters into the contract at the price you found in Part a. Now, 75 days later, the stock price is P55.75. Determine the value of the forward contract at this point.                       (5 marks)
   It is now the expiration day, and the stock price is P58.50. Determine the value of the forward contract at this time.         (5 marks)

On October 1, 2014, Foss Company sold inventory to a company inEngland. The sale was for 500,000 British pounds and payment willbe received on March 1, 2015. On October 1, Foss entered into aforward contract to sell 500,000 British pounds on March 1 at theforward rate of $1.68. Spot rates for the British pound are asfollows:
October1 $1.60
December31 1.67
March1 1.65

Foss has a December 31 fiscal year-end.

Required:
Compute each of the following:

1. The dollars tobe received on March 1, 2015, from selling the 500,000 pounds tothe exchange dealer.

2. The dollars thatwould have been received from the account receivable if Foss hadnot indicate the negative hedged the sale contract with the forwardcontract.

3. The discount orpremium on the forward contract.

4. The transactiongain or loss on the exposed asset related to the sale in 2014 and2015.

5. The transactiongain or loss on the forward contract in 2014 and 2015.

6. The amount ofthe discount or premium on the forward contract amortized in 2014and 2015.

Analyze the main reasons why a company might prefer a foreigncurrency option over a forward contract in hedging a foreigncurrency firm commitment. In contrast, analyze the main reasons whya company might prefer a forward contract over an option in hedginga foreign currency asset or liability. Determine the option (i.e.,a foreign currency option or a forward contract) that you considerto be more effective. Provide a rationale for your response.

Assume that all the companies in the world use InternationalFinancial Reporting Standards (IFRS). Determine at least two (2)obstacles to the worldwide comparability of financial statements,and provide one (1) strategy to overcome the obstacles in question.Provide support for your rationale.

On Jan 1 Small Co. purchased inventory from a foreign supplierat a price of 20,000 FCU. (FCU is “foreign currency units.”)

Smalll Co. will make payment in three months on April 1.

On Jan 1 Small Co entered into a forward contract maturing onApril 1as a fair value hedge of its FCU liability.

Small Co. closes its books to prepare interim financialstatements on Jan 31 of each year.

Prepare all journal entries, including adjusting entries, torecord the transaction and the forward contract.

*Forward rate is for a contract written on Jan 1 to mature onApril 1.

I want to be sure that the answer down below are these thecorrect journal entries because i'm not too sure. Also, do we usethe forward rate on Jan 1? Thank You.

Journal entries:

Jan 1:

Merchandise Inventory Debit (20000 * 0.80) $16000

Accounts Payable Credit (20000 * 0.80) $16000

(Being Good purchased in foreign currency )

Jan 31:

Foreign currency fluctuation debit (20000*0.84 -0.80) $800

Accounts Payable Credit $800

(Being forex fluctuation adjusted)

April 1:

Accounts Payable Debit (20000*$0.84) $16800

Cash Credit $16800

(Being Payment made)