Mwabonwa Dot Com, a Zambian Company, holds an asset in South Africa and faces the following scenario:

	Case 1	Case 2	Case 3	Case 4
Spot rate	ZMW1.20/ZAR	ZMW1.12/ZAR	ZMW1.00/ZAR	ZMW0.90/ZAR
	ZAR 3,000,000	ZAR 2,800,000	ZAR 2,600,000	ZAR 2,400,000
Probability	20%	30%	30%	20%

i. Compute the exchange exposure faced by Mwabonwa Dot Com.

ii. What is the variance of the dollar price of this asset if Mwabonwa Dot Com remains unhedged against this exposure?

iii. Discuss how Mwabonwa Dot Com can hedge its exchange risk exposure and also examine the consequences of hedging.

iv. If Mwabonwa Dot Com hedges against this exposure using a forward contract, what is the variance of the Kwacha value of the hedged position?