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I need the answer as soon as possible X SA is a French company It expects to sell $1,000 of airline seats for cash in
I need the answer as soon as possible
X SA is a French company It expects to sell $1,000 of airline seats for cash in six months' time. = The current spot rate is 1 = $1. It sells the future dollar receipts forward to fix the amount to be received in euros and to provide a hedge against the risk of a fall in the value of the dollar against the euro. At inception (30 September 20X1) At inception, the anticipated future sale is not recorded in the accounts, and the derivative (the forward contract) has an initial value of zero. Reporting date (31 December 20X1) The dollar has weakened with the following results: a. The derivative is an asset with a fair value of 80. b. The change in expected cash flows in euros from the forecast seat sales has fallen by 75 (1,000 to 925)Step by Step Solution
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