1) A U.S. firm holds an asset in Great Britain and faces the following scenario State 1 25% State 2 50% $ 2.00 2,500 S 5,000 State 3 25% $ 1.80 lE Probability Spot rate $ 2.20 E 2,000 $4,400 3,000 $5,400 P* Pound sterling price of the asset held by the U.S. firm P Dollar price of the same asset The "exposure" (i.e. the regression coefficient beta) is Hint: Calculate the expression Cov(P,S) VAR(S) What is the beta (i.e. exposure)? 1) A U.S. firm holds an asset in Great Britain and faces the following scenario State 1 25% State 2 50% $ 2.00 2,500 S 5,000 State 3 25% $ 1.80 lE Probability Spot rate $ 2.20 E 2,000 $4,400 3,000 $5,400 P* Pound sterling price of the asset held by the U.S. firm P Dollar price of the same asset The "exposure" (i.e. the regression coefficient beta) is Hint: Calculate the expression Cov(P,S) VAR(S) What is the beta (i.e. exposure)