A U.S. firm holds an asset in France and faces the following scenario: State 2 State 4 25% Probability Probability 25% 25% 25% 25% 1.80/E 1,200 1.60/E 1,10) 1.40/E E1,000 E1,300 2,600 S2,160 1,760 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 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. Discuss how you can hedge your exchange risk exposure and also examine the consequences of hedging