You have bid for a possible export order that would provide a cash inflow of 1 million

Question:

You have bid for a possible export order that would provide a cash inflow of €1 million in six months. The spot exchange rate is $.9094 = €1 and the six-month forward rate is $.9070 = €1.

There are two sources of uncertainty:

(1) The euro could appreciate or depreciate and

(2) You may or may not receive the export order. Illustrate in each case the profits or losses that you would make if

(a) You sell one million euros forward, and

(b) You buy a six-month option to sell euros with an exercise price of $.9070/€.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...