On June 1, the PM Corp. (a U.S.-based company) sold goods to a Swiss customer for 100,000 francs, who will pay on October 1. On June 1, PM purchased an option (strike price = $1.00) to sell 100,000 francs on October 1. The option is designated a fair value hedge. The option's time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income. Relevant $ exchange rates per franc and option premia follow. Date Spot Rate Put Option Premium for Oct. 1 (strike price $1.00) June 1 $1.000 $0.040 June 30 0.985 0.032 October 1 0.972 N/A

1. What is the net foreign exchange gain or loss PM will recognize in its June 30 income statement? Put a - sign in front of a net loss.
2. What is the option contract's intrinsic value on October 1?