1. AU.S. firm holds an asset in Great Britain and faces the following scenario: State 1 State 2 State 3 Probability 25% 50% 25% Spot rate $ 2.207 $ 2.00/ $ 1.80/E P 2,000 2,500 3,000 P $4,400 $5,000 $5,400 where, Pe Pound Sterling price of the asset held by the US firm P = Dollar price of the same asset a) Compute the exchange rate exposure faced by the US firm- be sure to show all work in detail to earn full credit b) Explain how you could hedge this exposure