1. On May 1, 2013, Mosby Company received an order to sell a machine to a customer in Canada at a price of 2,000,000 Mexican pesos. The machine was shipped and payment was received on March 1, 2014. On May 1, 2013, Mosby purchased a put option giving it the right to sell 2,000,000 pesos on March 1, 2014, at a price of $190,000. Mosby properly designates the option as a fair value hedge of the peso firm commitment. The option cost $3,000 and had a fair value of $3,200 on December 31, 2013. The following spot exchange rates apply:

Mosby's incremental borrowing rate is 12 percent, and the present value factor for two months at a 12 percent annual rate is .9803. What was the overall result of having entered into this hedge of the exposure to foreign exchange risk?

Multiple Choice

• $0

• $9,000 net loss on the option.

• $9,000 net gain on the option.

• $2,000 net gain on the option.

• $2,000 net loss.

esos. The machine was shipped and payment w iving it the right to sell 2,000,000 pesos on Marc alue hedge of the peso firm commitment. The op ollowing spot exchange rates apply: Date May 1, 2013 December 31, 2013 March 1, 2014 Spot Rate $0.095 $0.094 $0.089 Mosby's incremental borrowing rate is 12 percent, an .9803. What was the overall result of having entered into this Multiple Choice o so esos. The machine was shipped and payment w iving it the right to sell 2,000,000 pesos on Marc alue hedge of the peso firm commitment. The op ollowing spot exchange rates apply: Date May 1, 2013 December 31, 2013 March 1, 2014 Spot Rate $0.095 $0.094 $0.089 Mosby's incremental borrowing rate is 12 percent, an .9803. What was the overall result of having entered into this Multiple Choice o so