A U.S. firm holds an asset in Great Britain and faces the following scenario:

	State 1				State 2				State 3
Probability	25%				50%				25%
Spot rate	$	2.20	/		$	2.00	/		$	1.80	/
P*		3,000				2,500				2,000
P	$	6,600			$	5,000			$	3,600

where,

P^* = Pound sterling price of the asset held by the U.S. firm

P = Dollar price of the same asset

The "exposure" (i.e. the regression coefficient beta) is

Hint: Calculate the expression Cov(P,S)Var(s)Cov(,)Var(s)

Multiple Choice

2,500

7,500

none of the options

2,500