On December 1, 2014, Thomas Company, a U.S. corporation, purchases inventory from a vendor in Italy for 400,000 euros. Payment is due in 90 days. To hedge the transaction, Thomas signs a forward contract to buy 400,000 euros in 90 days at $1.3670. Thomas uses a discount rate of 6% (present value factor for 30 days = .9950; 60 days = .9901; 90 days = .9851). Assume the forward contract will be settled net and this is a cash flow hedge. Currency exchange rates are shown below:

 

Date

Spot Rate

Forward Rate

to March 1

December 1, 2014

$1.3694

$1.3670

December 31, 2014

$1.3642

$1.3660

January 30, 2015

$1.3670

$1.3690

March 1, 2015

$1.3712

$1.3712

What is the fair value of the forward contract at March 1?