Given the following information for a 90 day contract:

US Dollars FC

Value Today 3,750 5,000

Interest Rate 4% 7%

3 months interest 37.50 87.50

Value in 3 months ?? ??

The spot rate today is 1 FC = .75

Calculate what the forward rate will be?

3. On November 1, 2016, a U.S. company sold merchandise to a foreign firm for 100,000 FC with

payment to be made on January 31, 2017, in FC. To hedge against fluctuations in exchange rates, the firm

also entered into a forward exchange contract on November 1, 2016 to sell 100,000 FC on January 31,

2017. The U.S. firm has a December 31 year end for accounting purposes. The following exchange rates

may apply:

Date Spot Rate Fwd. Rate

11/1/16 $0.15 $0.17

12/31/16 $0.16 $0.175

1/31/17 $0.165 $0.165

Discount rate = 10%

Required:

Make all the necessary journal entries for the U.S. firm relative to these events occurring between

November 1, 2016, and January 31, 2017.