A U.S. firm holds an asset in U.K. and faces the following scenarios: Outcome Probability P(GBP)* 1/3 2,300 3,150 1/3 3,580 P(GBP) is the pound value of the asset. S(USD/GBP) 1.2 1.25 1.32 1/3 (a) What is the size of asset exposure to the exchange rate risk? (b) What is the variance of the unhedged position? (c) Suppose the U.S. firm wants to hedge this exposure by using a forward contract, should the company take a long or short position on U.K. pound forward contract? (d) Suppose forward exchange rate is 1 =$1.26, what is the variance of the hedged position? Instructions: Use excel to calculate the above questions. Write down your answers on this file. On the excel spreadsheet, follow my excel templet to set up the problem. Show clearly the functions/formulas you used in the corresponding cells. I will check your work. Submit both this word file and the excel file