A U$.$S$.$ firm holds an asset in France and faces the following scenario: A U$.$S$.$ firm holds an asset in France and faces the following scenario:

In the above table, $P^{**}$ is the euro price of the asset held by the U$.$S$.$ firm and $P$ is the dollar price of the asset.

Required:

a$.$ Compute the exchange exposure faced by the U$.$S$.$ firm.

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 hedged

position?