Trebble, inc. is a u. s.-based mnc that will need 2 million euros in 90 days to purchase european imports. therefore, trebble purchases a forward contract at a forward rate of $1.05. if the spot rate of the euro in 90 days is $1.00, trebble will pay $ for the euros and incur an opportunity cost.

 If the spot rate of the euro in 90 days is $1.00, Trebble will pay $2,100,000 for the euros and will incur an opportunity cost.

SinceTrebble Inc. has already purchased a forward contract, it has to buy Euros at the contracted forward rate - $1.05 irrespective of the spot rate.

So, it will buy 2 million Euros at

If the spot rate of the euro is $1, then Trebble Inc. will incur a loss of .

If Trebble Inc. chose to buy Euros at the prevailing spot rate on the day it wanted to pay for the imports, it would have saved USD100,000. It could have also invested this amount and earned an interest.

So, the opportunity cost here is the $100,000 it lost on the forward contract plus the interest it could have earned on the amount.

answer; trojan horse;