3. Explain how a U.S. company’s commitment to purchase inventory with settlement in foreign currency (FC) might become less attractive over time and how adverse effects on earnings could be reduced....

3. Explain how a U.S. company’s commitment to purchase inventory with settlement in foreign currency (FC) might become less attractive over time and how adverse effects on earnings could be reduced.

4. A company is forecasting the purchase of inventory from an overseas vendor with payment to be made in a foreign currency (FC). Assume an option were used as a hedging instrument for this forecasted transaction. Explain how changes in the time value of the option would be measured and accounted for.