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A U.S. firm holds an asset in Great Britain and faces the following scenario: P * = Pound sterling price of the asset held by

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

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

a) Calculate and interpret the exposure coefficient.

b) Describe an effective hedge and calculate the dollar amount of the hedge?

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