Currency swap or option

Also, the paragraph had written exercise price $7.25 gives worst result than the swap even before the premium is deducted, becuz of the exchange rate being fixed on the swap back of the original amount paid. What is the meaning of exchange rate being fixed on the swap back of the original amount paid???

It is calculated using the purchasing power parity formula and is €/$ 0.1315 which is the same as $/€ 7.6046 (1/0.1315)

The question specifically states that the swap back of the principal at the end of the three years will be at todays spot rate. The swap the principal now and then swap back the principal at the end of the three years.