A U.S. based MNC will need 100,000 euros in 1 year. It could obtain a forward contract to purchase the euros in 1 year. The 1-year forward rate is $1.20, the same rate as currency future contracts on euros. If the MNC purchases euro 1 year forward, its dollar cost in 1 year is:
Cost in $ = Payable x Forward rate
= 100,000 euros x $1.20
= $120,000