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3 Jan 2018
What is designated market value and how do you compute it?
What is designated market value and how do you compute it?
mentor1234Lv10
29 Aug 2021
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Keith LeannonLv2
3 Jan 2018
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Related questions
X Corp., based in the US, sold inventory for 500,000 Euro to Y Co. on December 2, 2008. The customer will pay March 1, 2009, payable in Euros. On 12/2/2008, X entered into a 90 -day forward contract to hedge the receivable from Y. The following exchange rates apply:
| 12/2/08 | 13/31/08 | 3/1/09 | |
| Spot Rate | $1.70 | 1.705 | 1.71 |
| Forward Rate for 3/1/09 | 1.68 | 1.69 | --- |
Required:
1. Assume the Forward was designated as a cash flow hedge and MereleΓ’ΒΒs incremental borrowing rate is 6% giving a 60- day present value factor of .9901. Give all entries related to these transactions and date the entries.
2. Assume the Forward was designated as a fair value hedge. Give all entries for these transactions and date the entries.
