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A U.S. firm holds an asset in France and faces the following scenario: State 1 State 2 State 3 State 4 Probability 25% 125% 125%
A U.S. firm holds an asset in France and faces the following scenario: State 1 State 2 State 3 State 4 Probability 25% 125% 125% 25% Spot rate $1.27/ $1.24/ $1.17/ $1.11/ 1600 1500 1300 1000 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. Estimate the expected value of the spot rate (USD X.XXXX)
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