Murray Electric has agreed to buy precision lathes from Germany and is worried about the dollar/euro exchange rate. The total invoice amount is 800,000 to be paid in 6 months when the lathes are delivered. CrownJet has agreed to sell a 20-seater jet to a soccer team in France and is worried about the dollar/euro exchange rate. CrownJet is expecting to receive 800,000 in 6 months when the plane is delivered. Murray and CrownJet enter into the forward contract expiring 6 months from now. The $/ spot exchange rate is 1.10. The forward rate is $1.12/. Murray Elec goes long. CrownJet goes short. The contract is cash settled.

It is the expiry date. The spot exchange rate is $/ 1.05. On the expiry date: