On December 1, 20x1, Golf Co. enters into a futures contract to sell 100,000 foreign currency...

On December 1, 20x1, Golf Co. enters into a futures contract to sell 100,000 foreign currency units on January 31, 20x2 for 300 per unit. The broker requires an initial margin deposit of 40,000. The current rates are as follows:

Dec. 1, 20x1 Dec. 31, 20x1 Jan. 31, 20x2
300 298 297
Provide Journal entries.

Expert Solution

ekkarill92 answered 1 year ago

P Company enters into a forward contract to sell foreign currency. At the contract date, the...

P Company enters into a forward contract to sell foreign currency. At the contract date, the forward rate is $1.20 and the spot rate is $1.24. BRIEFLY explain why this may not appear to be logical (and it doesn't), and why would P do this anyway.

a) Explain a foreign currency futures contract and outline the differences between futures and forwards. b)...

a) Explain a foreign currency futures contract and outline the differences between futures and forwards. b) The Chicago Mercantile Exchange (CME) and the New York Board of Trade (NBOT) operate futures markets in currencies in the following pairs US$/pounds and US Dollar/Pound. The value standardize size of a sterling futures contract is 6,500 pounds. Describe how a UK company that expects to received US$800,000 in three months time can use a futures contract to hedge transaction exposure if the following...

On December 15, 20x1, ABC Co. enters into a 30-day forward contract to buy 10,000 yens...

On December 15, 20x1, ABC Co. enters into a 30-day forward contract to buy 10,000 yens at the forward rate of $1.50. On December 31, 20x1, the forward rate was $1.25 and by January 15, 20x2, the spot rate moved to $1.60 Requirements: Provide the journal entries under each of the following scenarios: (A) the contract is settled by the actual purchase of yens; (B) the contract is settled through net cash payment.

A company enters into a short futures contract to sell 5000 bushels of wheat for 450...

A company enters into a short futures contract to sell 5000 bushels of wheat for 450 cents per bushel. The initial margin is $ 3000 and the maintenance margin is $2000. What price change would lead to a margin call? Under what circumstances could 1,500 be with drawn from the margin account? Please provide formulas thank you

On January 1, 2020, Pharoah Co. enters into a contract to sell a customer a wiring...

On January 1, 2020, Pharoah Co. enters into a contract to sell a customer a wiring base and shelving unit that sits on the base in exchange for $3,100. The contract requires delivery of the base first but states that payment for the base will not be made until the shelving unit is delivered. Pharoah identifies two performance obligations and allocates $1,085 of the transaction price to the wiring base and the remainder to the shelving unit. The cost of...

Foreign Currency Commitment: U.S. Corporation entered into a contract on November 1, 2017 to sell two...

Foreign Currency Commitment: U.S. Corporation entered into a contract on November 1, 2017 to sell two machines to International Company for 750,000 foreign currency units (FCU). The machines were to be delivered and the amount collected on March 1, 2018. In order to hedge its commitment, U.S. entered, on November 1, 2017 , into a forward contract to sell 750,000 FCU on March 1, 2018. The forward contract met all conditions for hedging a foreign currency commitment. Selected exchange rates...

An investor enters into a short 3 months’ forward contract to sell 100,000 British pounds for...

An investor enters into a short 3 months’ forward contract to sell 100,000 British pounds for US dollars. Table 2 Spot and forward quotes of the USD/GBP exchange rate Maturity Bid Offer Spot 1.2732 1.2736 1-month forward 1.2746 1.2751 3-month forward 1.2772 1.2777 1-year forward 1.2883 1.2889 Use Table 2 to indicate how much does the investor gain or lose if the exchange rate at the end of the contract is (a) 1.25 (b) 1.30 (c) Explain what is meant...

A company enters into a short futures contract to sell 5,000 bushels of wheat for 250 cents per bushel.

a) A company enters into a short futures contract to sell 5,000 bushels of wheat for 250 cents per bushel. The initial margin is $3,000 and the maintenance margin is $2,000. What price change would lead to a margin call?b) How does the cost-of-carry argument for commodity futures differ from futures written on other classes on assets? How would you explain differences in the sign and magnitude of the basis across different classes of commodities?

Why are foreign currency futures contracts more popular with individuals and banks while foreign currency forwards...

Why are foreign currency futures contracts more popular with individuals and banks while foreign currency forwards are more popular with businesses? [6 marks]

Please explain the difference between a currency forward contract and a currency futures contract. Include advantages/disadvantages...

Please explain the difference between a currency forward contract and a currency futures contract. Include advantages/disadvantages of both to a multinational company.

Question