A Canadian firm holds an asset in France and faces the following scenario: State 1 State 3 State 2 50% 20% 30% Probability Spot rate Price of the euro- asset $1.6/euro $1.65/euro $1.70euro euro 2,000 euro 3,000 euro 4,000 A. WHAT IS THE EXPECTED VALUE, E(P), OF THE INVESTMENT IN CAD? (HINT: GET THE PRO-RATED VALUE) B. WHAT IS THE VARIANCE, VAR(S), OF THE EXCHANGE RATE? (HINT: GOOGLE FORMULA FOR VARIANCE. YOUR MEAN WOULD BE THE PRORATED VALUE OF THE SPOT RATE (E(S). C. WHAT IS THE EXPOSURE, i.e. REGRESSION COEFFICIENT "BETA"? Recall (Hint: You will need to calculate COV(P/S). Beta= COV(P/S) / VAR(S)