Assume the following rates for SFW Corporation selling to a foreign customer who will pay 2,000 foreign currency units on the due date. SFW will hedge the sale with a forward contract, purchased on the sales date and settling on the sale due date.

Date of sales transaction: Spot rate = $0.23/ Forward rate to sale due date = $0.22

Sales remittance due date spot rate = $0.19

Compute the following, showing AND labelling all items. You must show gain or loss.

1. Total foreign currency gain or loss on the transaction. (Yes, it is the total of #2 and #3....but show detail of the amount).

2. Gain or loss due to credit decision

3. Gain or loss due to contract decision