Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $1,000,440 and the exchange rate will be $1.4 /. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $500,480 and the exchange rate will be $1.6 /. You assess that the American economy will experience a boom with a 30 percent probability and a recession with a 70 percent probability.

Estimate your exposure to the exchange risk. (Do not round your answer and leave your answer with two decimals )

Estimate your exposure to the exchange risk =