Foreign Exchange Gains and Losses and Hedge. On June 1, 1998, University Research Labs, a domestic research and development operation, placed an order for special laboratory equipment with a companyy in Holland. The purchase price was stated in florins at F400,000 and was payable in 60 days (July 30, 1998). The exchange rate for florins on June 1 was \(\$ 0.50\).

On this same date, University Research Labs decided to hedge its foreign currency commitment by purchasing \(\mathrm{F} 300,000\) for delivery in 60 days at a price of \(\$ 0.49\) in the futures market.

These transactions were both settled on July 30, 1998. The exchange rate for florins on that date was \(\$ 0.51\).

\section*{Required:}

1. Calculate the exchange gains and losses associated with these transactions. Include in your computations, the effects of any premium or discount on the hedging transaction.

2. Comment on the wisdom of the hedging activities.