2 Problem 9.2 A U.S. firm holds an asset in France and faces the following scenario: 14.28 points Probability Spot rate P* State 1 25% State 2 25% State 3 25% $ 1.90 per euro 1,500 $ 1.80 per euro 1,400 $ 1.70 per euro 1,300 State 4 25% $ 1.60 per euro 1,200 eBook $ 2,080 $ 1,820 $ 1,220 In the above table, P is the euro price of the asset held by the U.S. firm and Pis the dollar price of the asset. $ 1,440 Ask Required: a. Compute the exchange exposure faced by the U.S. firm. Print b. What is the variance of the dollar price of this asset if the U.S. firm remains unhedged against this exposure? c. If the U.S. firm hedges against this exposure using a forward contract, what is the variance of the dollar value of the hedge position? References a. Exposure b. Variance C. Variance