suppose you are a british venture capitalist holding a major stake in an e-commerce start up in silicon valley. As a brattish resident, you are concerned with the pound value of your US equity position. Assume that if the American economy boomier the future, your equity stake will be worth $ 1,000,000, and the exchange ratewill be $ 1.40/. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $ 500,000 , and the exchange rate will be $ 1.60/ . You assess that the American economy will experience a boom with a 70 percent probability and the re ession with a 30 percent probability.

What is your estimated exposure to the exchange risk?

2,976,000 A

-$ 3,445,231 B

- 3,445,231 C

$ 2,976,000 D