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17) The table below depicts the three possible values of future exchange rate and your foreign assets. You used the simple regression model to estimate
17) The table below depicts the three possible values of future exchange rate and your foreign assets. You used the simple regression model to estimate the effect of the exchange rate on the assets' value and estimated the slope b=1630. If you use the forward hedge, find the value of your hedged position if the exchange rate in the future will be 1.6$/? Assume that forward rate is equal to the expected spot rate.
State Prob. P* S($/ ) P(=SP*) 1 0.25 990 1.4 $1,386 2 0.5 1,000 1.5 $1,500 3 0.25 1,070 1.6 $1,712
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