Suppose that the U.S. firm FIN340 Inc. buys construction equipment from the German firm XYZ at a price of 6 million. The equipment is to be delivered to the United States and paid for in one year. The current exchange rate is 0.89/$ (0.89 = $1). The current interest rate on one-year U.S. Treasury bills is 3%, and the current interest rate on one-year German government bonds is 1.5%.

If FIN340 enters a forward contract, agreeing to buy 6 million in one year at an exchange rate of 0.85 = $1., how many dollars does it need today if it plans to invest the dollars at the U.S. interest rate of 3%?

	1.	$6.85 million
	2.	$7.06 million
	3.	$6.95 million
	4.	$6.55 million