The response by the instructor: This is a simple case of
the forward market being in contango with the forward rate being above the
current spot rate. In this situation as the contract matures the forward rate
will converge to the spot rate and since the forward rate is above the spot
rate the forward rate will fall so if you had bought the EUR at the forward
rate of 1.133 USD/EUR at maturity of the contract you would suffer a loss
because the spot rate at maturity would be below the forward rate of 1.133
USD/EUR. You would be paying more for the EUR than it would currently be worth.
If they asked this on the exam I think I would still get it wrong.