I dotn get this… Why is sun taking the loss? I read the question to say, sun agrees to buy in 90 days at .875 at which point the market rate is .90. It seem like sun should win since they had a contract to buy at the lower rate than market, thus causing the seller to lose. If he was betting on a short at .90 and it declined, the seller would win, but he bet at .875 and it went up… What the H-E-Double hockey stick? Rolo
prob should post question
Its because SUN agreed to buy $ at the rate of 0.875. Had it gone for conversion at later date, it would have been able to convert at 0.90. So, it had to bear net loss of 0.875-0.90 for each euro converted.