Answer: EUR 1,200,000

The payoff for the bank from the forward contract is calculated by comparing the agreed-upon forward rate with the actual exchange rate at the time of expiration. In this case, the bank has a contract to sell GBP 60 million at a forward rate of EUR 1.15 per GBP 1. The actual exchange rate after 6 months is EUR 1.13 per GBP 1. The value of the contract for the bank at expiration is: \[ GBP 60,000,000 \times 1.15 \, \text{EUR/GBP} = EUR 69,000,000 \] The cost to close out the contract at the market rate would be: \[ GBP 60,000,000 \times 1.13 \, \text{EUR/GBP} = EUR 67,800,000 \] The final payoff for the bank is the difference between the value of the contract and the cost to close out the contract: \[ 69,000,000 - 67,800,000 = EUR 1,200,000 \] Alternatively, the payoff can be calculated by multiplying the difference between the forward rate and the market rate by the amount of GBP: \[ 60,000,000 \times (1.15 - 1.13) = EUR 1,200,000 \] Thus, the correct answer is EUR 1,200,000, which corresponds to option C.

Author: LeetQuiz Editorial Team