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Maloney Corporation has decided to speculate on the foreign exchange market, and has entered into a 6-month forward contract to sell 250,000 Mexican pesos. When
- Maloney Corporation has decided to speculate on the foreign exchange market, and has entered into a 6-month forward contract to sell 250,000 Mexican pesos. When the forward contract was acquired on October 1, 2012, the spot rate for the peso was $0.1601 and the 6-month future was $0.1639. On December 31, 2012, the spot rate was $0.1616 and the future rate was $0.1607. On April 1, 2013, the spot rate was $0.1650.
Spot Rate Forward Rate
10/1/12 0.1601 0.1639
12/31/12 0.1616 0.1607
4/1/13 0.1650
A. Prepare the necessary journal entries to record the forward contract
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B. Calculate the total gain or loss on the speculative hedge
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