Suppose that you hold a piece of land in the city of London that you may want to sell in one year. As a U.S. resident, you are concerned with the dollar value of the land. The following table presents the three possible future states of the British economy that you are considering. Each state has an equal probability.

Calculate your asset exposure and interpret the result.

Probability Pound value of the land Spot rate of Dollar value dollars per of the land pound $1.6/ $3,200 $1.5/ $2,700 $1.4/ $2,240 1/3 Boom Normal Recession 13 2,000 1,800 1,600 1/3