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Answer: EUR 1,200,000
The value of the contract for the bank at expiration: GBP 60,000,000 * 1.15 EUR/GBP = EUR 69,000,000. The cost to close out the contract for the bank at expiration: GBP 60,000,000 * 1.13 EUR/GBP = EUR 67,800,000. Therefore, the final payoff in EUR to the bank = 69,000,000 – 67,800,000 = EUR 1,200,000, which can also be calculated as: 60,000,000 * (1.15 – 1.13) = EUR 1,200,000.
Author: LeetQuiz Editorial Team
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A
EUR -2,000,000
B
EUR -1,200,000
C
EUR 1,200,000
D
EUR 2,000,000