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 March1

December 1,2014     $1.3694 $1.3670       

December 31, 2014  $1.3642 $.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

$1,654.97 asset

$1,654.97 liability

$1,680 asset

$-0-

What is the fair value of the forward contract at December 31, 2014?

$396.04 liability

$396.04 asset

$400.00 asset

$400.00 liability