Chapter 1 Problem 14-21 to 25
Problem 14-21
Question 1 Answer B
The notional figure is 8,000 kilos and the notional value is 8,000 kilos times the underlying
Fixed price of P1,200 per kilo or P9,600,000.
Question 2 Answer C
Market price – 12/31/2008 1,500
Underlying fixed price 1,200
Derivative asset 300
Forward contract receivable (8,000 x 300) 2,400,000
Present value of derivative asset (2,400,000 x .91) 2,184,000
The present value of P2,184,000 is recognized as forward contract receivable on December 31, 2008 because the amount is collectible on January 1, 2010, one year from December 31, 2008.
Question 3 Answer B
Market price – 12/31/2009 1,000
Underlying fixed price 1,200
Derivative liability 200
Forward contract payable – 12/31/2009 (8,000 x 200) 1,600,000
Problem 14-22 Answer C
Fair value of call option (120 – 100 = 20 x 10,000) 200,000
Problem 14-23 Answer B
Exchange rate on July 31 (80,000,000 / 92) 869,565
Strike price (80,000,000 / 100) 800,000
Derivative asset 69,565
Call option payment 10,000
Saving 59,565
Problem 14-24
Question 1 Answer A
Camry’s payment to Corolla (5,000,000 x 2%) 100,000
Question 2 Answer C
Fair value of interest rate swap (100,000 x .926) 92,600
Problem 14-25 Answer C
Notional amount 435,000
Exchange rate on December 31, 2008 (47,850,000 / 115) 416,087
Fair value of forward contract receivable 18,913
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