Answer:
d. transaction loss; $3,695
Step-by-step explanation:
Calculations:
Today ¥110.58 can be exchanged by $1
US firm to pay today = 100,000,000/110.58 = 904322.66
US firm had to pay $904322.66 today.
US firm chooses to pay three months after the transaction and do not uses any hedging technique.
Three months later on settlement date ¥110.13 can be exchanged by $1, so less ¥ can be exchanged now than three months ago ( ¥110.58). Now US firm would incur transaction loss. Translation loss/gain occurs when balance sheet of a firm is converted from one currency to another.
US firm to pay 3 months later = 100000000/110.13 = 908017.79
US firm to pay $904322.66 three months later
Transaction gain/loss = $904322.66 - $908017.79 = -$3695.13
So US firm incurs loss of $3695.13, rounded off to $3695