Hedging Transactions. Intermountain Grain Importers/Exporters, located in Salt Lake City, buys and sells grains in the international market. The following transactions were handled:

Sep. 1 Sold \(1,000,000\) bushels of wheat to a French cooperative for \(18,000,000\) francs \((F r 1=\$ 0.1864)\). Payment is due October 30.

16-27. 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.
16-28. Hedging Transactions. Intermountain Grain Importers/Exporters, located in Salt Lake City, buys and sells grains in the international market. The following transactions were handled:
Sep. 1 Sold \(1,000,000\) bushels of wheat to a French cooperative for \(18,000,000\) francs \((F r 1=\$ 0.1864)\). Payment is due October 30.

1 Negotiated a forward contract with an exchange broker to sell \(18,000,000\) francs on October 30 for \(\$ 0.1842\), as management felt the franc might decline in value.
5 Sold \(2,000,000\) bushels of wheat to a company in Spain for \(\$ 5,300,000\) (P1 \(=\$ 0.0074\) ). The account is to be settled in U. S. dollars on November 5.
15 Purchased rice from an exporting company that operates in Japan. The contract provided for payment of \(¥ 16,000,000\) on October 15 . Exchange rate for yen on September 15 was \(\$ 0.00943\).
15 Entered into a forward contract to buy \(16,000,000\) yen on October 15 for \(\$ 0.00965\) per yen.
18 Sold 500 tons of soybean meal to Quebec Meal and Flour, Ltd. for \(C \$ 52,000\) (C\$1 \(=\$ 0.8245)\). The account is to be settled December 17 .
Oct. 15 Received \(¥ 16,000,000\) under terms of the forward contract and then submitted payment for the rice purchased on September 15 ( \(¥ 1=\) \(\$ 0.00945\) ).
30 Received Fr18,000,000 from the French company and settled the forward contract ( \(F\) 1 \(=\$ 0.1857\) ).
Nov. 5 Received payment in full for the wheat sold on September 5 to the Spanish company \((P 1=\$ 0.0073)\).
Dec. 17 Received payment from Quebec Meal and Flour, Ltd. for the September 18 sale ( \(\mathrm{C} \$ 1=\$ 0.8246)\).
\section*{Required:}
Compute the exchange gain or loss at time of settlement for each purchase or sale transaction and the related hedging transaction.