Question

Assume Sun Microsystems expects to receive €20,000,000 in 90 days. A dealer provide a quote of $0.875 for a currency forward contract to expire in 90 days. Suppose that at the end of 90 days, the rate is $0.90. Assume that settlement is in cash. Calculate the cash flow at expiration if Sun Microsystems enters into forward contract expiring in 90 days to buy dollars at $0.875