On December 1, 2020, Speed Company, a U. S. firm, sold merchandise to Jacqueline Company of Canada for 400,000 Canadian dollars (CAD). Collection of the receivable is due on February 1, 2021. Speed purchased a foreign currency put option with a strike price of $.94 (U. S.) on December 1, 2020. This foreign currency option is designated as a cash flow hedge. Relevant exchange rates follow: Date Spot Rate Option
Premium
December 1, 2018 $0.97 $0.05
December 31, 2018 $0.95 $0.04
February 1, 2019 $0.94 $0.03
Compute the fair value of the foreign currency option at February 1, 2019. A) $7,500.
B) $6,000.
C) $3,000.
D) $1,500.
E) $4,500.
Compute the U. S. dollars received on February 1, 2019. A) $141,000.
B) $142,500.
C) $136,500.
D) $138,000.
E) $145,500.

Externalities or spillover occurs when some of the benefits or the costs of production are not fully reflected in market demand or supply schedules.

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

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