What is the gain or loss on the forward contract

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Reference no: EM132578028

Brzoska Inc.'s German subsidiary has forecasted earnings next year of €10 million. Assume that the current one-year forward rate for euros is $1.33, the same as the current spot rate. Further assume that the euro depreciates over the year, so that the weighted average exchange rate is $1.30 over the year.

If Brzoska implements a forward hedge on the expected earnings by selling €10 million one year forward, what is the gain or loss on the forward contract?

a. $170,000 gain

b. $300,000 gain

c. $170,000 loss

d. $300,000 loss

Reference no: EM132578028

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